Thursday, July 17, 2008

College Cost Reduction and Access Act Updates

A while ago, I wrote about the College Cost Reduction and Access Act (CCRA). Due to recent developments, here is an update:

1. Re-Consolidating into the federal Direct Program

Part of my original critique of the CCRA was that, although graduates working in public service may have their loans forgiven after 10 years of making payments, the only loans eligible for this benefit are federal Direct loans. One problem with this provision is that many graduates hold other types of student loans, such as loans from private companies that usually charge much higher interest rates, that are not eligible for forgiveness. Another problem is that, prior to the CCRA, many graduates had already consolidated their federal loans out of the federal Direct program- thus rendering themselves ineligible for the loan forgiveness program.

However, as of July 1, 2008 borrowers have the right to re-consolidate their federal loans into the federal Direct consolidation program. Thus, those who had already consolidated their federal loans into a non-Direct program can now qualify for public service forgiveness if they meet the other requirements of the program.

Now, on July 1, I certainly didn't get a letter from Sallie Mae (or the Department of Education for that matter) informing me of my right to re-consolidate into the Federal Direct loan program, but alas. Apparently we do have that right. I'm sure glad I'm on top of these things. Kudos to organizations like the Project on Student Debt who keep us abreast of these intricacies.

I'm going to fill out an application, send it to the bureaucracy that is the Department of Education, and see what happens. If I run into hassles I will certainly blog about it.

2. What is Public Service?

Another part of my critique was that the definition for "public service" is vague and very broad. What this means is that graduates are in the dark as to whether or not their employment will end up qualifying as "public service" at the end of their 10 years of service. The proposed regulations to "clarify" this section of the law will basically require graduates to verify that they've worked in qualifying public service for 10 years, submit this verification to the Department of Education, and "hope for the best."

The Project on Student Debt has an action alert out requesting the Department of Education to:

"Please fix this problem by developing a system that lets borrowers confirm and track their eligibility for this form of loan forgiveness, so that they have a clear incentive to enter and continue in public service, and a sense of security while doing such important work."

If this is something you think is important, sign on.

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