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Student Loan Relief, or Merely Deferral of the Problem?

Recent law graduates may now have something else to celebrate besides receiving their juris doctorates. The National Law Journal reports that a new federal program enacted as part of the College Cost Reduction & Access Act goes into effect July 1, which offers loan forgiveness for public interest employees and includes an income-based repayment option for all borrowers. Though the law applies generally to all student loans, it potentially offers benefits for law students.

The loan forgiveness features of the program apply to students who choose public interest positions. After a borrower makes payments for 10 years on government-backed student loans, the government will forgive the remaining loan balance for those who qualify. The loan forgiveness features are intended to make it more affordable to graduates to accept public-interest positions. More importantly, because of the 10 year repayment requirement, the program create incentive to remain at a public interest job for a longer term, instead of simply taking the job for a few years and bolting for the private sector.

The federal program also includes an income-based repayment option, which is available to all law graduates whether they work in public-interest jobs or not. Under income-based repayment, monthly student loan payments are capped at 15 percent of the borrower's discretionary income. After the borrower makes qualifying payments for 25 years, the federal government will forgive any remaining loan debt.

According to the article, those making as much as $60,000 to $70,000 per year could potentially qualify for the income repayment program.

These programs clearly offer some relief. But borrowers still need to ask whether they want to be making loan repayments 25 years down the line, at a time when they may need to pay for their own children's college tuition. Somehow, there's got to be a better way to alleviate the problem of debt besides spreading it out to subsequent generations.

Posted by Carolyn Elefant on June 22, 2009 at 02:15 PM | Permalink | Comments (3)


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