Select College Students Could See Loans Forgiven

The new student aid bill that President Bush is expected to sign includes a provision that could reduce the number of loans that go into default, though the impact is unclear and down the road a ways.

The U.S. House passed a compromise version of the College Cost Reduction and Access act (CCRA) last week and sent it to Bush who has said he would sign it. The bill has received widespread publicity for provisions that increase the value of Pell grants that students can receive and lowers the interest rate that borrowers pay on the loans.

A less publicized provision provides for loan forgiveness to borrowers that meet certain criteria and work in specific areas.

Loans covered are those granted under direct federal loans, such as the Stafford and PLUS programs. Direct federal loans made up about 22 percent of federal student loans in the 2005-2006 school year, according to the House Committee on Education and Labor.

Borrowers covered by the forgiveness program must work in “areas of national need,” including public sector employees, firefighters, members of the military, First Responders, law enforcement officers, nurses, early childhood educators, librarians and others. The program also covers borrowers that work for not-for-profit organizations.

To qualify the borrowers must work in the qualified position for 10 years and make payments on their student loans for 10 years. After that time, the remaining value of the direct loan would be forgiven.

The program will cover new borrowers who make payments after October 1, 2007. The committee couldn’t provide the number of loans or the dollar value of loans that might be forgiven.