February 04, 2017

Public service loan forgiveness programs offer relief from debt burden, say panelists

With more Americans saddled with student debt than ever, public service loan forgiveness programs offer a viable way to help manage the burden, say panelists at the Feb. 2 program “Treading Water: Fighting the Rising Tide of Student Debt” during the Midyear Meeting in Miami. 

Trailing only home mortgages, educational debt has ballooned to an all-time high: “There is $1.3 trillion in outstanding student loans,” said panelist Whitney Barkley-Denney, legislative policy counsel at the Center for Responsible Lending in Durham, N.C.

The debt burden underscores the importance of programs that offer loan forgiveness after a certain number of years in qualifying public service positions. “It’s important…because most recipients of student loans cannot afford to live in the communities they serve,” said panelist Michael Dumas, an assistant district attorney in Lewiston, Maine.

“In 2016, 431,000 individuals submitted applications for public service loan forgiveness to the Department of Education,” Dumas said.

The federal public service loan forgiveness program began in 2007 and is available to employees of governmental organizations, 501(c)(3) nonprofits and other groups who hold “qualifying” public service jobs for 10 years.

In order to confirm whether a position qualifies, applicants fill out a certification form to be reviewed by the U.S. Department of Education. Borrowers are encouraged to resubmit it each year to ensure they still qualify.

Checking yearly whether an employer qualifies is critical. In 2015, many in the federal program learned after years of service that their employers would not qualify for the federal program – even after initial confirmation from the Department of Education. Last December, the American Bar Association filed suit against the department for retroactively refusing to honor its loan forgiveness commitments.

What does the future hold for forgiveness programs under President Donald Trump?

Dumas believes the Trump administration will eventually move everyone to an income-driven loan repayment plan, cap payments at a 12.5 percent income level, and forgive loans after a 15-year term. Law students would likely go from 120 payments to 180 payments under the law.

“However, under the new administration, the future of the public service loan forgiveness program is still murky at best,” Dumas said.

States also offer similar relief options. In 2006, the Oregon State Bar created its Loan Repayment Assistance Program, which awards forgivable student loans of up to $7,500 annually. If the recipient stays in qualified public service position for three years, the loan is forgiven, said panelist Jennifer E. Nicholls of Brophy Schmor in Medofrd, Ore.

“The program has a lot of value and allows lawyers the opportunity to stay in the Oregon community to practice law,” she said.

“Treading Water: Fighting the Rising Tide of Student Debt” was sponsored by the ABA Section of State and Local Government Law.

Crystal Araujo, vice-chair, ABA Law Student Division, and Scott Sharinn of Sharinn & Lipshie, P.C., of Uniondale, N.Y., also participated on the program.