FFEL Borrower Eligibility For Public Service Loan Forgiveness

Abstract:

The recently enacted College Cost Reduction and Access Act (CCRAA) creates a new loan forgiveness option for Direct Loan borrowers who hold public service jobs. FFEL borrowers may take advantage of public service loan forgiveness by consolidating or reconsolidating their FFEL loans into the Direct Loan program. However, borrowers will eventually need to enter into either the income contingent, or the new income-based repayment plan to be eligible for public service loan forgiveness. Borrowers who remain in the standard repayment plan would have no need for forgiveness after 10 years of payments because the loan will have been paid in full. Payments made under extended repayment plans would also be ineligible since their calculated monthly repayment amounts would be less than a standard 10-year repayment plan amount. Thus the law seems to allow only public servants with salaries low enough to qualify for income contingent or income-based repayment plans to be eligible for loan forgiveness.

The full article was originally published in NASFAA’s Today’s News on 10/15/2007.