COLLEGE COST REDUCTION AND ACCESS ACT
The College Cost Reduction and Access Act (CCRAA) (H.R. 2669) was signed into law on September 27, 2007. The Act provides debt relief for graduates who are repaying federal student loans. The summary below provides a general overview of a comprehensive law and is not intended to provide complete information or to address all issues relating to the Act. There are two major provisions of the law that impact law students and graduates: Public Service Loan Forgiveness and Income-based repayment.
Public Service Loan Forgivenss (PSLF)
The Public Service Loan Forgiveness Program (PSLF) was created to encourage individuals to enter and continue to work full-time in a broad category of public service jobs
Generally speaking, a public service job is defined by the Act as a full-time job in public interest law services, government, military, emergency management, public safety, law enforcement, public health, public education, social work, child care, public library sciences, or any other job at a non-profit 501 (c)(3) organization. The final regulations issued October 23, 2008 provide some additional guidance on eligible employment types.
The PSLF program allows eligible borrowers to cancel the remaining balance of their Direct Loans* after serving full-time at a public service organization for at least 10 years while making 120 qualifying monthly payments after October 1, 2007.
The government will forgive any outstanding federal loan balance once 120 loan payments (generally, 10 years) have been made while working in an eligible public service position. Graduates making payments on a Direct Loan could begin “counting” their 120 payments as of October 1, 2007. Any loan payment made prior to graduation would not be included in the ten year period for forgiveness.
*Graduates with FFELP loans would be required to consolidate their federal loans into the Direct Loan Program to be eligible for the forgiveness.
Income-Based Repayment (IBR)
Section 203 of the Act creates a new loan repayment option that reduces monthly federal loan payments for all high debt/low income borrowers. Income-based repayment (IBR) places an annual ceiling on federal loan payments which is based on the borrower’s income. This portion of the law took effect on July 1, 2009.
In general, loan payments would be limited to 15% of discretionary income, where discretionary income is defined as adjusted gross income minus 150% of the poverty level for the borrower’s family size. For more detailed information on the formula used to determine the monthly payment, utilize the IBR calculator.
In addition to reducing the monthly payment required, the income-based repayment program also requires the government to pay any unpaid interest on the subsidized portions of the loans for up to three years after the borrower elects the IBR option.
After 25 years of payment, the government will write-off any unpaid principal and accrued interest.
More detailed information on the loan forgiveness provisions can be found in the resource links below.
- Public Service Loan Forgiveness Information - Comprehensive information about Public Service Loan Forgiveness including which jobs qualify, which loans are covered, and how to earn forgiveness.
- PSLF Basic Checklist
- IBRinfo.org - Project on Student Debt's web site specific to Income-Based Repayment (IBR) and Public Service Loan Forgiveness. Register your email to receive notification of important developments.
- Detailed public service loan forgiveness information from finaid.org
- PSLF Web Page
- PSLF Questions and Answers