Loan Forgiveness and Repayment Options

Loan Forgiveness and Repayment Options

Loan Repayment Assistance Program (LRAP)
Albany Law School has always been committed to making rewarding public interest careers more viable to its graduates. To further that commitment, the Loan Repayment Assistance Program (LRAP) was launched in December 2004. This program is designed to help alleviate the financial burden of educational loan repayment upon students who wish to pursue careers in public interest law, as well as city, county and state attorney's offices, and agencies operated by a city, county or state.

The LRAP allows graduates from the Class of 2010 or later to apply for forgivable loans of up to $10,000 per year for a maximum of three years.

The full program description and application are available below. Applications will be accepted from Jan. 31, 2013 to March 31, 2013.

Questions should be directed to Andrea Wedler, Director of Financial Aid, via e-mail or at 518-445-2357.    

View a talk given at Albany Law School in March 2013 by Deanne Loonin, director of the National Consumer Law Center's Student Loan Borrower Assistance Project.

College Cost Reduction and Access Act of 2007
This Act established a new public service loan forgiveness program. This program discharges any remaining debt after 10 years of full-time employment in public service. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit. Only payments made on or after October 1, 2007, count toward the required 120 monthly payments. (Borrowers may consolidate into Direct Lending in order to qualify for this loan forgiveness program starting July 1, 2008.)

Public Service Loan Forgiveness
(This text was provided by and additional information can be found at www.ibrinfo.org) Public Service Loan Forgiveness is a new program for federal student loan borrowers who work in certain kinds of jobs. It will forgive remaining debt after 10 years of eligible employment and qualifying loan payments. (During those 10 years, the Income-Based Repayment (IBR) plan can help keep your loan payments affordable.)

Who can get Public Service Loan Forgiveness?
This program is for people with federal student loans who work in a wide range of "public service" jobs, including jobs in government and nonprofit 501(c)(3) organizations. What are eligible jobs?

In most cases, eligibility is based on whether you work for an eligible employer. Your job is eligible if you:

  • are employed by any nonprofit, tax-exempt 501(c)(3) organization;
  • are employed by the federal government, a state government, local government, or tribal government (this includes the military and public schools and colleges); or
  • serve in a full-time Americorps position.

If you don't meet these criteria, you may still be eligible in certain circumstances. The Department of Education's draft regulations create a two-part test:

  1. your employer is not "a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing;" and 
  2. your employer provides any of the following services: emergency management; military service; public safety; law enforcement; public interest law services; public child care; public service for individuals with disabilities and the elderly; public health; public education; public library services; and school library or other school-based services.

Please note that these definitions of eligible jobs reflect the outcome of negotiations concluded in April 2008, but they may be revised before the Department of Education finalizes its rules for Public Service Loan Forgiveness by November 1, 2008.

What kinds of loans does it cover?
It covers federal Stafford, Grad PLUS, or consolidation loans as long as they are in the Direct Loan program. Borrowers with loans in the Guaranteed (or FFEL) loan program must switch to the Direct Loan program to get this benefit.

When does the 10-year clock start, and which payments count?
Only payments made after October 1, 2007, count towards the 10 years (120 monthly payments, not necessarily consecutive) required for Public Service Loan Forgiveness. Qualifying payments must be made through the Direct Loan program and include Income Contingent Repayment, Standard (10-year) Repayment, or Income-Based Repayment (available in July 2009).

To count, these payments must be made while you're working full-time in an eligible job. "Full-time," according to the latest information from the Department of Education, means an average of 30 hours per week or the standard for full-time used by the employer, whichever is greater. In professions such as teaching, annual contracts that include at least eight months of full-time work will be treated as the equivalent of a full year's employment. If you meet all the criteria, the earliest your remaining debt could be forgiven is October 2017.

What if I've already paid off my loans by then?
This loan forgiveness program will only benefit people who still owe money on their federal loans after 10 years of eligible payments and employment. If your income is low relative to your debt, and you qualify for reduced payments under IBR (or Income Contingent Repayment) at any time during those 10 years, you will likely have debt left to forgive.

Income-Based Repayment (IBR)

Income-Based Repayment (IBR) is a new payment option for federal student loans. It can help borrowers keep their loan payments affordable with payment caps based on their income and family size. For most eligible borrowers, IBR loan payments will be less than 10 percent of their income - and even smaller for borrowers with low earnings. IBR will also forgive remaining debt, if any, after 25 years of qualifying payments.

Who can use IBR? IBR is available to federal student loan borrowers in both the Direct and Guaranteed (or FFEL) loan programs, and covers most types of federal loans made to students, but not those made to parents (click here for more about qualifying loans). To enter IBR, you have to have enough debt relative to your income to qualify for a reduced payment. That means it would take more than 15 percent of whatever you earn above 150% of poverty level to pay off your loans on a standard 10-year payment plan. Use our calculator to see if you're likely to be eligible.

 
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This chart shows examples of IBR payment caps as a percentage of the borrower's family income, based on various incomes and family sizes.

How does IBR make payments more affordable? IBR uses a kind of sliding scale to determine how much you can afford to pay on your federal loans. If you earn below 150% of the poverty level for your family size, your required loan payment will be $0. If you earn more, your loan payment will be capped at 15 percent of whatever you earn above that amount. Except for the highest earners, that usually works out to less than 10 percent of your total income.

What about interest?In some situations, your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow if your affordable payments are low enough, anything you still owe after 25 years of qualifying payments will be forgiven.

What are qualifying payments? The Department of Education has indicated that the following types of payments will count towards IBR's 25-year forgiveness period, as long as you are in IBR at some point during those 25 years.

  • Payments made in the Income Contingent Repayment plan (ICR) before July 1, 2009.
  • All payments made on or after July 1, 2009 in the IBR, Income Contingent Repayment (ICR), and Standard (10-year) Repayment plans.
  • Periods when the borrower has a calculated payment of zero in IBR or ICR (this occurs when your income is at or below 150% of the poverty level for your family size).
  • Periods on or after July 1, 2009, when the borrower has been granted an economic hardship deferment.
  • Find out more about how to qualify for IBR.    

Higher Education Reauthorization and College Opportunity Act of 2008
For full details, please visit the American Bar Association's Student Loan Forgiveness website. The following text was written by the ABA. On August 14, 2008, the President signed into law, P.L. 110-315, Higher Education and Opportunity Act, which provides public service lawyers four additional avenues of potential loan relief. This legislation reauthorized the Higher Education Act for the first time since 1998 and included among a number of substantial reforms to higher education the following:

  • The John R. Justice Prosecutors and Defenders Incentive Act (Section 951)
    This program, championed by Sen. Richard Durbin (D-IL), and joined last Congress and this by Sen. Arlen Specter (R-PA), and in the House by Rep. David Scott (D-GA), Rep. Bobby Scott (D-VA) and Rep. Ted Poe (R-TX), provides student loan relief to prosecutors and public defenders including for juvenile delinquency proceedings, and those who provide education and training. The program provides up to $10,000 per year, in exchange for a one-time renewable 3-year commitment, to a maximum $60,000. Given the recruitment purpose of the legislation, priority will be given to those with fewer than 3 years or fewer of service; and those least able to repay. Additional rules will be promulgated by the Department of Justice, including how the money will be distributed to ensure parity between prosecutors and public defenders, and among the state and local jurisdictions. The program will be authorized for just six years, at $25 million, plus such additional sums as necessary to carry out the program. The Inspector General will conduct a study at year three to report on the efficacy of the program.
  • The Legal Assistance Loan Repayment Program (Section 431)
    This program, championed by Sen. Tom Harkin (D-IA), and joined in amending it to S.1642, the Senate counterpart to H.R. 4137, by Sen. Benjamin Cardin (D-MD), provides civil legal assistance lawyers, including those who work with those with disabilities, loan repayment of up to $6,000 per year, in exchange for a renewable three-year commitment, to a maximum of $40,000. As a recruitment tool, the program gives priority to those with less than five years of civil legal assistance practice, and fewer than three years in the present office. The program is authorized indefinitely at $10 Million per year. Language would prevent benefitting from both this program and related ones, e.g., the 428K forgiveness program for jobs of national need and the College Cost Reduction and Access Act program, the parameters of this, and additional regulations, to be promulgated by the Department of Education.
  • 428K Loan Forgiveness for Service in Jobs of National Need (Section 430)
    This program provides a lengthy list of jobs considered to ones of "national need." Among the list, it includes "Public Sector Employees," which in turn includes "public interest legal services (including prosecution, public defense, or legal advocacy in low-income communities at a nonprofit organization)." This program would provide no more than $2,000 per year, and for no more than 5 years and $10,000. It will be administered by the Department of Education. Again, this program includes a prohibition on persons benefitting from it, and other loan forgiveness programs.
  • Perkins Loan Cancellation for Public Service (Section 465)
    This program cancels a percentage of a borrower's outstanding Perkins's loan debt for performing certain kinds of public service jobs. In Conference Committee, language was added extending this program's reach to "a full-time attorney employed in a defender organization established with section 3006A(g)(2) of Title 18", i.e., (A) federal public defender, and (B) community defender. The program cancels 15% for the first or second year; 20% for the third or fourth year, and 30% for the fifth, or 100% forgiveness for 5 years service. In addition, Congress also increased the loan limits under the Perkins program for graduate and professional students to $8,000 per year, to a maximum of $60,000.