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If You're Broke Enough, the Feds Will Forgive Your Loans. Eventually.

By Kevin Fayle on June 23, 2009 | Last updated on March 21, 2019
Look upon your loans and do not fear them, class of 2009: the federal government is going to help you make those payments, and could even wipe the slate clean after, oh, a decade or so.

If you qualify, that is.

Under a federal law, the College Cost Reduction & Access Act, that will kick in on July 1 of this year, the federal government will cap the loan payments for qualifying graduates and forgive the loans of lawyers who choose to go into public interest work.
Here's how the program will function, according to the National Law Journal:

The program will benefit law students in two key ways. Most prominent is loan forgiveness for public interest workers. 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 program guarantees loan forgiveness not only to lawyers who serve the public interest but also to a wide array of public service workers including teachers, law enforcement officers and certain health care professionals.
But, what's that you say?  You aren't planning on pursuing public interest work, but are pretty sure that you're not going to be pulling down a BigLaw salary?  Well, read on:

The second aspect of the new federal program that will benefit law graduates is the income-based repayment option, in which monthly loan payments are capped according to the borrower's annual income. Public interest attorneys must choose this repayment option to qualify for loan forgiveness, but graduates who don't go into public interest also may choose to participate. Under income-based repayment, monthly student loan payments are capped at 15% of the borrower's discretionary income. After the borrower makes qualifying payments for 25 years, the federal government will forgive any remaining loan debt.
Sounds pretty sweet, right? 

The only problem is that not many students know about the program, and its provisions are pretty complicated, so even the ones that do know about the program don't know exactly how it works.

One other drawback is that the government is funding the program by reducing the subsidies it pays to private lenders in order to encourage them to loan more money to students.  This could make it harder for some aspiring students to even secure a loan in the first place.

On the flip side, the federal program is also allowing some schools to spread the love a little bit more when it comes to their own loan forgiveness programs.  Boalt Hall, excuse me, University of California, Berkeley School of Law has already taken steps in this direction. 

This sounds like a fantastic opportunity for many people who are worried about their loans, and could even encourage more people to pursue a higher education.  Those graduates who come out of law school and land a job with a salary that's outside the parameters of the federal program, but still not at the level of a BigLaw first year, remain screwed, however.

See Also:
SCOTUS to Examine Bankruptcy Discharge of Student Loans (Strategist)
Student Loan Relief on the Way For Law Grads (ABA Journal)
Student Loan Bailout: You Only Have to be Broke for Ten Years (Above the Law)

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