The Federal Government offers a variety of loan repayment assistance or forgiveness for lawyers in public service careers. The ABA continues to work to increase the available loan repayment assistance provided by the federal government.
The College Cost Reduction and Access Act of 2007 created new loan forgiveness options. Summaries are provided below. Regulations for these programs were finalized in 2008. More detailed information, including live and recorded webinars can be found at www.equaljusticeworks.org and www.askheatherjarvis.com. Additional information also is available at www.finaid.org and www.ibrinfo.org.
A new program created by the CCRAA is called Income Based Repayment or IBR. Any educational loan borrower (public service not required) with a "partial financial hardship" (high debt burden to income) may be eligible for this program, which caps payments for federal loans. The payments are capped at 15 percent of the borrower’s "discretionary" income and if payments are made for 25 years, the remaining principal and interest is forgiven by the federal government.
However, individuals who borrow their first federal student loan after October 1, 2007 AND borrowed a student loan or or after October 1, 2011 (one loan can satisfy both requirements) may be eligible for Income Contingent-A Repayment (ICR). This programs caps loan payments at ten percent of "discretionary" income and provides eligibility for loan forgiveness after 20 years of payments.
The Public Service Loan Forgiveness provision in the CCRAA is even better for public interest attorneys because the forgiveness provisions are effective after ten years of public service. Eligible public service includes employment with the government, a 501(c)(3) non-profit organization, and a very narrow group of private organizations that provide legal assistance and receive at least some government funding.
To be eligible, individuals are required to make 120 payments after October 1, 2007, while working in eligible employment. In addition, individuals must have loans that are in the Federal Direct program. If their loans are not in the Federal Direct program currently, they may consolidate them into the program.
An Employer and Employee Guide to Public Service Loan Forgiveness provides information and tools to help eligible borrowers take the steps necessary for loan forgiveness, including employment certification.
The Department of Justice provides grants to each state for loan repayment assistance for prosecutors and public defenders. In 2012, more than $3.5 million was distributed to state agencies for them to provide the grants in their states. The amount of funding, which has decreased from a high of $10 million in 2010, is not known at this time. More information is available at http://www.equaljusticeworks.org/ed-debt/students/loan-repayment-assistance-programs/federal-LRAPs/JRJ.
Perkins loans are unique among federal loans, because they offer a cancellation provision for persons engaged in selected forms of public service. A Federal Perkins Loan can be cancelled if it has not been consolidated yet and the borrower is employed full-time in certain employment, including as an employee of a public or non-profit child or family service agency providing services to high risk children and their families from low-income communities (which some civil legal aid attorneys have received cancellation under); employment as a law enforcement or corrections officer (which prosecutors receive cancellation under); and, most recently, public defenders. Attorneys who seek cancellation of their Perkins loans may submit a written request for forgiveness to the Perkins Loan Officer at their law school or university. Details of the program are at 20 USC 1087ee, which is available at http://www.law.cornell.edu/uscode/text/20/1087ee.
The Office of Personnel Management issued rules (5 CFR Part 537) permitting federal agencies demonstrating difficulty in recruiting skilled employees to offer loan repayment assistance. Under the rules, an employee must sign an agreement to remain in the service of the agency for not less than three years to receive the benefit. Agencies may pay up to $6,000 a year per employee, not to exceed a total of $40,000. Although Congress did not appropriate any funds to the agencies to support loan repayment assistance, some agencies, including the Commerce Department, Social Security Administration, Department of Justice and General Services Administration, offer this benefit to employees. For additional information, contact individual federal agencies to determine which agencies offer the benefit to employees or visit the OPM's loan repayment program site at www.opm.gov/oca/pay/studentloan/index.asp.
Public Law 107-68 established a loan repayment program for Senate employees.
Many branches of the military offer some sort of loan forgiveness. For example:
The U.S. Army Loan Repayment Program provides that individuals enlisted in the Loan Repayment Program ("LRP") earn 33 1/3% or $1,500 (whichever is greater) toward the remaining original unpaid principal on all qualifying loans for each completed year of enlisted active duty up to $65,000. "Qualified loans" include Stafford and Perkins loans; private loans are not covered. The LRP payments will only be authorized toward the remaining original unpaid principal balances when the solider enters active duty. Loans incurred after entering active duty will not be re-paid. Payments are made directly to the lender; therefore payments made under the LRP are subject to federal and state taxes.
Judge Advocate Continuation Pay ("JACP") is designed as an incentive for judge advocates who are already on active duty to remain in service. While continuation is not a loan repayment program per se, it is anticipated that many graduates will use the pay to pay student loans. The JACP authorizes continuation pay of up to $60,000 for active duty judge advocates who have completed their initial active duty service obligation. The Air Force, among other branches of the Service, has established a Continuation Pay Program.
Americorps service and other public service programs provide specific assistance with educational debt. See www.finaid.org/loans/forgiveness.phtml