New Bill Forgives College Loans for Public Service Employment

The new College Cost Reduction and Access Act just recently signed into law offers some interesting opportunities for college students. Some of the provisions of the law:

- Increase Pell Grant Scholarships over time,
- Provide up-front tuition assistance for students willing to teach in high poverty areas or high-need subject areas
- A landmark investment of $510 million to be made into minority serving institutions
- Reduce the interest costs by 50% over the next four years on subsidized student loans

The most interesting provision of the new legislation is federal debt forgiveness for anyone going into a public sector job. The government will forgive the balance of debt not paid after 10 years as long as the student works in the public sector. The public sector is defined as military service members, first responders, law enforcement officers, firefighters, nurses, public offenders, prosecutors, early childhood educators, librarians, and others.

The program will figure out your monthly payment based on either your salary if you are single or your combined salary if married. The public service employee will make 120 payments and the rest would be forgiven by the government.

So what is the drawback? Well the good news is that the government would forgive the remaining school debt. The bad news is that the employee will now owe taxes on that forgiven money. For example, let’s say that the remaining balance on a note comes out to $100,000. The tax bill due that year could be as high as an additional $35,000. Where someone who is making $45,000 to $50,000 a year is going to come up with $35,000, I have no idea.

Only Congress can take a good idea and turn it into a bad one.

For more information you can go to www.finaid.org.