College Cost Reduction Act – Basic Facts and New Resources to Help You

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Update, July 1, 2009! Check out this post about applying for Income-based repayment from your lender!

This July 1st, the College Cost Reduction and Access Act (CCRAA) of 2007 will take effect and includes provisions to make undergraduate and graduate education more affordable for aspiring social-impact professionals.

The CCRAA is a complicated piece of legislation that, if you take advantage of it, can help you retire college and grad school debt early.

The main programs that the CCRAA has created include:

Income-Based Repayment (IBR) — Caps monthly direct and guaranteed (FFEL) student loan payments based on the borrower’s income and family size. According to IBRinfo, “For most eligible borrowers, IBR loan payments will be less than 10 percent of their income – and even smaller for borrowers with low earnings. IBR will also forgive remaining debt, if any, after 25 years of qualifying payments.” Besides taking out the right kind of loan to start with (or consolidating your loans into the Direct Loan Program), it’s important to note that if you get married, your spouse’s income counts when calculating your monthly payment.

Public Service Loan Forgiveness (PSLF) — Retires the direct or guaranteed (FFEL) student loan debt of public service professionals who’ve been making ten years of qualified payments on their loans. Counting as “public service” includes 501(c)(3) nonprofit employment; government (federal, state, local, tribal), military, public school and college employment; and national service participation (like AmeriCorps and Peace Corps). Read the fine print of what counts as “qualified payments.”

You can put both of these new programs to work for you — so you can make income-contingent payments for ten years, and then retire your debt, if you qualify for participation. Also note that it’s really all up to you to access the programs and to keep track of your payment and employment records so that you can prove your eligibility.

Resources to Help You

Many twists and turns exist in the path to understanding the new law as you try to take full advantage of these programs for yourself, your students, or corps members in your program. Below are some places to learn more:

Equal Justice Works has launched a Student Loan Debt Relief Resource Center and podcast show EJW logoto break down the facts. Also check out EJW’s blog with news and updates about public interest issues. EJW’s focus is to make the public interest law careers affordable for new lawyers. But their tools and resources are accessible to anyone who is taking on student loan debt in order to pursue a career in service to others. The resource center includes calculators, forums, links to more information. EJW’s Heather Jarvis appeared at Brooklyn Law School last year, explaining the CCRA (link to the video.)

IBRinfo logoIBRinfo is a nonprofit source of information about the new programs. IBRinfo includes overviews of the programs, and information about who is eligible and how to access the benefits of the programs. IBRinfo also includes news, and lets you sign up for alerts.

Also check out this F.A.Q. from the National Council of Nonprofits.

To learn more about public service grad school options, check out the Idealist.org Public Service Graduate Education Resource Center, including the Idealist Grad School Blog Project.

And coming soon to cities throughout the U.S., the Idealist.org Graduate Degree Fairs for the Public Good.

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  1. This is great info! Thanks!

  2. Will this program apply to people that have student loans in current collections and aren’t able to get a deferment?

    • Jim Durr
    • September 8th, 2009

    My son is entering his 3rd year of service in the Peace Corp.
    How do we get the student loans deferred for the 3rd year and how do we apply for loan reduction based on Peace Corp service?

    • Karen
    • February 5th, 2010

    wondering what it means – “after 25 years of qualifying payments” – what do they consider qualifying payments?

  3. I think it means making your payment on time each month, unless you’ve got deferrals and forbearances for example, economic hardship, or due to Peace Corps or AmeriCorps service. These payments can be income-based.

    This is from IBR Info.org:

    What are qualifying payments? The Department of Education has indicated that the following types of payments will count towards IBR’s 25-year forgiveness period, as long as you are in IBR at some point during those 25 years.

    * Payments made in the Income Contingent Repayment plan (ICR) before July 1, 2009.
    * All payments made on or after July 1, 2009 in the IBR, Income Contingent Repayment (ICR), and Standard (10-year) Repayment plans.
    * Periods when the borrower has a calculated payment of zero in IBR or ICR (this occurs when your income is at or below 150% of the poverty level for your family size).
    * Periods on or after July 1, 2009, when the borrower has been granted an economic hardship deferment.

    You can see a chart of monthly caps for IBR payments here: http://www.ibrinfo.org/what.vp.html.

  4. Talk with Peace Corps about helping you process the paper work for his third year of service. Peace Corps helped him process the paper work for his first two years, likely when he arrived at his initial staging site in the U.S. before flying out.

    Talk with his loan provider about cancellation for Peace Corps service. From the Peace Corps website: “Only Volunteers with Perkins loans are eligible for a partial cancellation benefit. Fifteen percent of your Perkins loans can be cancelled upon the completion of each 365 days of service during your first two years of service, and 20 percent can be cancelled upon completion of each of the third and fourth years. Therefore, four full years of service would equal a 70 percent cancellation of your existing loan.”

  5. This is a great conversation to have with the current holder of your federal loan. If you do not know who’s servicing your federal loans, search the National Student Loan Data System database. http://www.nslds.ed.gov/nslds_SA/

  6. The Peace Corps offers assistance with federal loans????

    • Laura
    • February 26th, 2010

    Does anyone know when the College Cost Reduction and Access Act will be up for re-authorization?

  7. Hi there!

    I’m new to this forum and just wanted to say hi. So Hi!

    bye!

    • Patty
    • August 10th, 2010

    I graduated grad school in 2005 with $50,000 in loans and have been making consistent payments on a direct loan. I make $70,000 salary. I have been working as a public employee with government since 2006. Would I be able to claim the public service since 2009 onward only? My current loan due is $27,000. Is it a good idea to the the IBR (income based repayment)?

  8. Hi Patty, I’m not a financial adviser! As I understand the program, you can only claim public service for the time when you were working in nonprofit or government positions (there’s a link in the post above to the definition that clarifies).

    IBR is not limited to public service folks, though. I would chat with your loan holder about your eligibility — they should have a form for you to use to apply and see if your income would lower your monthly payment. As far as whether it’s a good idea is really a personal decision based on your financial needs and priorities. Suze Orman or Michelle Singleterry might have a better answer for you!!

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