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Public service and student loan forgiveness

Chris Farrell Apr 12, 2012

Question: Your recent show on Federal Student Loans and associated debt kept my attention. A comment was made about possible forgiveness of a loan for someone who has been good with payments for years and has worked for civil service or non-profits. I’m in the non-profit sector (have been for 15+ years) and want to know how I might go about addressing that with the remaining principal on my Sallie Mae loan balance. Thanks. Gerri, Belmont, MA

Answer: Yes, the College Cost Reduction and Access Act of 2007 set up a new public service loan forgiveness program. The motivation behind the loan forgiveness policy was the idea that graduates with lots of student loan debt should still feel free to enter relatively low-paying public service careers.

What kind of work qualifies as public service? It’s a long list that includes government, military service, law enforcement, public health, early childhood education and social work.

The loan forgiveness is an all-or-nothing benefit. You have to meet all the requirements. For example, you can discharge any remaining debt after 10 years of full-time employment in public service. You need to have made 120 payments as part of the Direct Loan program. Only payments made on or after Oct. 1, 2007, count toward the required 120 months. The loans have to be in the Direct Loan program. (Anyone who thinks they may qualify for the benefit and isn’t in the Direct Loan program will want to get a Federal Direct Consolidation Loan.)

My guess, at this point, is that in your student loan payment schedule, you won’t be able to benefit from it. You can check out the details for yourself at the college financing website Finaid. It has a comprehensive discussion of the rules here.

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