October 11, 2007

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  FYI, i only have a few tix left for the boxing event on the 18th, so i you haven't talked to me about tix yet, i need confirmations by next tuesday.
  
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  By ANNE MARIE CHAKER of Wall Street Journal at anne-marie.chaker@wsj.com
  October 11, 2007

  A law President Bush signed last month drew a lot of attention for trying to make college more affordable for many. Less trumpeted were provisions that support the altruists among us.

  The law, signed by President Bush last month, appropriates $20 billion to cut interest rates on certain federal student loans and increase grant aid for low-income students over the next five years. But the College Cost Reduction and Access Act also creates an important incentive for all students to enter fields of public service by offering to forgive what could amount to tens of thousands of dollars of school debt per student.
  
   
  New legislation aims to lure more graduates to public service.
  • Students can have federal debt forgiven after 10 years in public-service work.
  • Qualifying jobs range from public health to law enforcement and public-interest law.
  • Conditions apply, so check with your financial-aid office or get information at www.finaid.org.

  The legislation broadly defines public service to include a wide range of occupations, such as public health, public education, working for a nonprofit organization and serving in law enforcement or as a public-interest lawyer. The Education Department says it expects to issue guidance to clarify exactly which professions will qualify.

  Here's how the Public Service Loan Forgiveness program will work: For people working in public service, the balance of a student loan is forgiven after 120 monthly payments, equal to 10 years. Let's say a single borrower graduates with $100,000 in student debt and gets a public-service job that pays $40,000 a year with annual raises of 3%. Because of the relatively low salary, the borrower would qualify for a newly created program known as Income Based Repayment, which stretches out the repayment period beyond the usual 10 years. Monthly repayments for this graduate would be between $309 and $403. After 10 years, the individual has repaid $42,448, and is forgiven the balance of $125,552, assuming interest of 6.8%, the current rate for federal Stafford loans.

  In order to qualify for the program, your loans must come under the federal Direct Loan program. If you borrowed from banks and other commercial lenders for your federal student loans, you can still qualify for the program by consolidating them through the Direct Loan program. Some colleges offer direct federal loans, while others work through commercial lenders only. Your college financial-aid office should have more information on the program. Or you can check FinAid.org, which offers financial-aid information and has a page at: www.finaid.org/loans/publicservice.phtml.

  Other professional groups also are expecting heightened interest in public-service work. "We have low salaries and a very high debt burden," says Rebecca Myers, special assistant to the executive director at the National Association of Social Workers. "We're really glad to see that there's some movement on this, and we believe it will help social workers."

  For medical-school graduates, who carry an average $130,000 of debt, the provision could save up to $75,000 in student-loan payments by working in public service for at least 10 years, according to the Association of American Medical Colleges. The group says it is seeking clarification on which specific types of jobs qualify as "public health" workers under the terms of the new provision.

  Some caveats: Federal law treats the amount of any debt forgiven as taxable income. Also, if a borrower gets married, the couple's combined income is counted toward calculating monthly payments, and the borrower might not qualify for Income Based Repayment.

  The law also helps needy students who receive Pell Grants. The maximum amount that students can currently receive is $4,310. That gets increased to $4,800 by next year, then to $5,000 starting in 2010, and then to $5,400 by 2012.

  However, to offset the cost of the additional spending, the government has reduced payments to banks and other lenders who, acting as middlemen, issue the federal loans to students. These lenders in turn have begun scaling back a host of discounts they had previously offered students amid competition for borrowers.

  The law also makes some improvements in the federal formula that schools use to determine aid. It doubles the amount of a dependent student's earnings that are sheltered to $6,000 by 2012-13 from $3,080 for 2008-09. It also raises the income threshold below which a family isn't expected to contribute to college to $30,000 from the current $20,000.
  
  
  
  

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