"We are hoping this will help graduates follow their passion, which is better for our society and our economy," says Robert Shireman, executive director of Project on Student Debt in California. "People can become teachers and social workers. That's good for all of us."
Forgiveness, of course, will benefit those in the income-based repayment plan who are taking longer than the standard 10 years to repay loans.
To be eligible, a loan must be a federal direct loan, meaning it came directly from Uncle Sam and not through a private lender. Those whose schools weren't in the direct lending program still can be eligible for forgiveness by consolidating their loans through the direct lending program. Even those who already consolidated can do so again to take advantage of the forgiveness program, Kantrowitz says.
They also must make 120 payments on loans - 10 years' worth - while in public service. The clock starts ticking in October, so payments made before then won't be counted, Kantrowitz says.
One potential outcome of the legislation is that lenders may increase marketing of private loans, which are more profitable to them. But if students must borrow, they should first choose a federal loan, which is the best deal around. And with this new legislation, federal loans are even better.
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