preLaw Magazine - Spring 2008 - (Page 21)

Even with an average debt of $83,000, law students can still follow their passion, thanks in part to a new federal loan repayment program and others. Get advice on how BY MICHELLE WEYENBERG to pursue your career no matter how big your debt. “[Loan repayment programs] allow me to know I can make those payments and be responsible to make those payments for an entire year,” Bowes said. “It’s a huge help and it would not be practical to be in this line of work without it.” able to base payments on their incomes. Starting on July 1, 2009, the law permits a borrower to limit annual debt repayment to 15 percent of discretionary income (that is, 15 percent of adjusted gross income minus 150 percent of the poverty level). For example, under standard 10-year repayment, a law-school graduate who owes $100,000 and has an income of $40,000 would have to pay more than $1,100 monthly toward that debt. Under this new program, that same student would make payments of about $300 a month. The federal government will forgive the remaining debt after the graduate has performed 10 years of full time public service. Critics argue that there is no long-term research that shows that debt forgiveness programs have any positive effect on the number of students going into public service careers. But Winograd said he feels this new program just makes it easier for students to follow their passions without financial headaches. “What I like about it is you have to put in 10 years of public-service employment. My hope is people are not going to devote a decade of their lives to something unless they want to do it,” Winograd said. “It’s a major change that makes it possible for people to do what they really want to do. In other words, they can follow their dreams instead of trying to scrape by and take care of their loans.” Here’s how the CCRAA works. The borrower must have made 120 payments through the Direct Loan program to benefit from loan forgiveness. Most law students have government-guaranteed loans rather than direct loans, but starting next July, any graduating student with governmentguaranteed loans can consolidate them into federal direct consolidation loans if they want to qualify for forgiveness under the public interest program. Only payments made on or after Oct. 1, 2007 qualify to be counted toward the 120 required monthly payments. To qualify for forgiveness, graduates must have worked full time for 120 months in a public-service job. The law defines such jobs very broadly to include all employment by government agencies and all employment by organizations that are tax-exempt under Section 501(c)(3) of the tax law. Other, non-legal careers such as social work, law enforcement or public child care also qualify for the repayment program. Another long-term proponent of the CCRAA is Professor Philip Schrag of Georgetown University Law Center. He serves as vice chair of the ABA’s committee on government relations and student financial aid. Schrag lobbied heavily for additional debt relief for law school graduates. Previous federal repayment programs were helpful, Schrag said, but students had to wait as many as 25 years before their loans were forgiven. Such a long term discouraged students from using those programs to help them have public service careers. Spring 2008 New federal lending program The College Cost Reduction and Access Act of 2007, also known as the CCRAA, will reduce debt for law students who work in government or public interest jobs. “This really makes it possible for anybody to go into public service and not be burdened with essentially another mortgage for the rest of their lives,” said Peter A. Winograd, a law professor at University of New Mexico School of Law and chair of the ABA committee on student financial aid. The new law, which was passed in September, allows all public servants — including all government workers and non-profit employees — to have a large portion of their educational debt forgiven after making reduced payments over a 10-year period. Borrowers will be 21

Table of Contents Feed for the Digital Edition of preLaw Magazine - Spring 2008

preLaw Magazine - Spring 2008 Contents From the Editor For the Record Large Gender Gap Remains Among Political Hopefuls Man Charged in LSAT Scam Barry Dean Recognized New Report Examines Legal Ed Drexel Receives Accredidation New Mexico No. 1 for Hispanics A Film Journey in Law A Law Student at Last Debt Salvation Great Law Schools for Minorities Grad Opts Out of Big Firm Job Specialties Helpful Advice

preLaw Magazine - Spring 2008

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