Forgiveness is in the offing for federal, state education loans

PERSONAL FINANCE

August 26, 2008|By EILEEN AMBROSE | EILEEN AMBROSE,eileen.ambrose@baltsun.com

The newly updated Higher Education Act included two words that will please families dealing with hefty education debt: loan forgiveness.

A recent column on the government's move to wipe out federal loans for those who work in lower-paying public service jobs generated more e-mail than usual.

Most of it came from parents wanting to find out how their children could qualify. That includes the father of a city prosecutor in Arizona, who wrote: "I am helping my son pay his law school loans. (Helping? I'm paying!!!)"

And then there is Jill Hoffman, who graduated from McDaniel College last year. She works at the Arc of Carroll County as an employment coordinator. She has about $50,000 in student loan debt, most of it in federal loans. She earns just under $30,000, which is not unusual for a nonprofit. She would like to go to graduate school and someday be a high school or community counselor.

"That's where I'm happiest," she says of public service. "I go to work every day, and I know that I'm making a difference. I can't imagine doing anything different."

Still, Hoffman says that making $340 monthly loan payments on her current salary is a stretch, and a long one.

So where can Hoffman and others find forgiveness?

You can't apply yet for the new loan forgiveness programs. Congress still must appropriate the money for them. That likely will happen in the next budget, says Mark Kantrowitz, publisher of FinAid, an online provider of loan information.

To keep tabs on the status of the forgiveness programs, call 800-4FEDAID (800-433-3243).

But once the programs are up and running, you may be able to rid yourself of thousands of dollars in federal loans.

You could have up to $2,000 a year in federal debt forgiven - up to $10,000 total - if you work full time in a field where there's a "national need." The list of "national need" jobs is long. It includes librarians, nurses, public defenders, firefighters, police officers, child welfare workers and those employed in applied sciences, technology, engineering or mathematics.Lawyers will have two other chances to erase debt. If you work at least three years as a civil legal assistance attorney, you can have up to $6,000 a year in student debt forgiven, for a total of $40,000. Or work at least three years as a prosecutor or public defender and get up to $10,000 a year forgiven, up to a total of $60,000.

You might not have to wait for these programs to be absolved of debt. Other forgiveness programs exist.

Work 10 years in public service while repaying your loans, and any remaining balance can be wiped out. This applies to payments made as of October 2007 and later. Eligible workers include police officers, social workers and government and nonprofit employees. This program is designed for those who make small payments under income-contingent or income-based repayment plans.

The Stafford Loan Forgiveness Program for Teachers forgives debt for full-time educators who have five years of service in low-income schools. Elementary and high-school teachers can have up to $5,000 forgiven. As much as $17,500 can be erased if you're rated a highly qualified special-education teacher or a highly qualified high school math or science teacher.

Last year, 26,565 teachers had nearly $161 million in loan debt forgiven, or an average of $6,057 each, according to government figures.

States, too, offer loan relief for residents working in certain fields or underserved areas.

In Maryland, the Janet L. Hoffman Loan Assistance Repayment Program awards up to $10,000 to repay student loans. The award can be renewed twice, for a total of $30,000. You must be employed by the state or local government, or by a Maryland nonprofit organization. Income can't exceed $60,000 for singles; $130,000 for married couples. Eligible workers include lawyers, nurses, physical and occupational therapists, social workers, speech pathologists and teachers in underperforming schools.

The state also awards tens of thousands of dollars of loan relief to dentists serving Maryland's neediest patients and primary care physicians working in underserved areas. Contact the Maryland Higher Education Commission in Annapolis for details at 410-260-4500.

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