ANNOUNCEMENTS
The Federal Student Loan Forgiveness Law: College Cost Reduction and Access Act of 2007*
Equal Justice Works has joined other public interest law leaders to support the enactment of the College Cost Reduction and Access Act (CCRAA), which was signed by the President in September 2007. The CCRAA has many implications for public service in the U.S. and will enable many more graduates to pursue public interest jobs without regard for debt, for many years one of the major obstacles for public interest minded lawyers. We think that the new law is one of the most significant breakthroughs for public interest law in a generation. Here are some recommended resources for more information about the law and what it means to you.
CCRAA UPDATE: Public Service Loan Forgiveness under CCRAA is not taxable
The United States Department of Treasury has confirmed that Public Service Loan Forgiveness under the College Cost Reduction and Access Act meets the requirements of Code Sec. 108(f) and is not taxable. Although all income from any source is generally taxable, including income from a cancellation of debt, Tax Code Section 108(f) allows forgiveness of student loans to be excluded from taxable income if the student loans were forgiven as a result of the borrower working for a certain period of time “in certain professions for any of a broad class of employers.” Section 108(f) defines “student loan” as a loan to assist an individual in attending an educational organization. Treasury has confirmed that all student loans eligible for CCRAA Public Service Loan Forgiveness, including Federal Direct Consolidation Loans, will be considered student loans. For this reason, the loan forgiveness meets the requirements of 108(f) and will not be taxed. In Revenue Ruling 2008-34, Treasury had previously confirmed that most law school based loan forgiveness programs also meet the requirements of 108(f) and will not be taxed. For the Treasury Department's letter to Sen. Levin, download the PDF; to view the official rev. rul., download the PDF.
NEW RESOURCE: Loan Forgiveness for Public Service Employment Checklist
Use this checklist to help you evaluate your loans and determine if you can benefit from a new federal student loan forgiveness program.
CCRAA UPDATE: Debt forgiveness by law schools wins IRS approval
A recently released Revenue Ruling from the Internal Revenue Service confirms that graduates in public service can keep the full benefit of an LRAP award. Revenue Ruling 2008-34 clarifies that a law school loan made under a Loan Repayment Assistance Program generally satisfies the requirements of section 108(f)(1) and is a "student loan" within the meaning of section 108(f)(2). Thus, the forgiveness of such a loan is not included in taxable income. The Revenue Ruling will appear in IRB 2008-28 dated July 14, 2008.
Most law schools already structure LRAP awards as forgiveable loans; those that do not can quickly restructure their LRAP so that their graduates can benefit from tax-free awards.
CCRAA UPDATE: Negotiated Rulemakers Reach Consensus on Proposed Draft Regulations
On April 14, negotiators reached consensus on proposed draft regulations for the 2007 College Cost Reduction and Access Act. The Department will release the proposed regulations for public comment before final regulations are issued by November 1, 2008.
Press Release
Congress Corrects “Marriage Penalty” in College Cost Reduction Act
The CCRAA originally based the amount of monthly repayment for married borrowers on the combined income of the borrower and his or her spouse, significantly lowering the benefit to married borrowers. Recently, Congress passed a technical amendment (S. 2371) providing that a married borrower who files a separate Federal income tax return will have the amount of the borrower's income-based repayment calculated solely on the basis of the borrower's student loan debt and adjusted gross income.
About the College Cost Reduction and Access Act of 2007
For a summary of the law including an overview of income-based repayment and loan forgiveness for public service employees:
- Equal Justice Works CCRAA Overview
- National Association of Student Financial Aid Administrators Summary
- National Association of Student Financial Aid Administrators Frequently Asked Questions about loan forgiveness for public service employment
- VIDEO: Heather Jarvis explores the federal student loan forgiveness law and how the College Cost Reduction and Access Act of 2007 affects law students. Recorded at Brooklyn Law School on February 19, 2008. Run time 46:02.
- PODCAST: Meredith R. Miller, Assistant Professor of Law at the
For a more detailed analysis:
- Equal Justice Works CCRAA PowerPoint Presentation with model calculations
- A law review paper by an expert on the new law, Georgetown Professor Philip Schrag: Federal Student Loan Repayment Assistance for Public Interest Lawyers and Other Employees of Governments and Nonprofit Organizations, Hofstra Law Review 36(1), September 2007.
The full text of the statute:
What It Means to You
Income Based Repayment
- IBRinfo.org
A site from the Project on Student Debt that provides information about Income-Based Repayment and Public Service Loan Forgiveness. Users can register to get updates as the U.S. Department of Education finalizes regulations and creates the systems for managing the new programs. - Equal Justice Works CCRAA Overview
- A worksheet to help you calculate your monthly payment amount: Income-Based Repayment Worksheet created by Jeffrey E. Hanson, PhD., Director, Borrower Education Services, Access Group, Inc.
- Income-Based Repayment Calculator
FinAid’s calculator allows you to estimate your monthly payments under the Income-Based Repayment (IBR) option by entering information about your debt and adjusted gross income. - Examples of estimated monthly payments for various starting incomes with annual salary increases: Monthly Student Loan Payments using Income-Based Repayment
Source: Phillip Schrag, 2007. - Questions and answers from the Project on Student Debt about the Income-Based Repayment option including how your eligibility is determined, which loans are eligible, and how monthly payments are calculated: http://projectonstudentdebt.org/initiative_page_view.php?initiative_idx=&initiative_page_idx=20
- Summary and analysis of Income-Based Repayment and Income-Contingent Repayment: www.finaid.org/loans/ibr.phtml
Loan Forgiveness for Public Service Employees
- Equal Justice Works CCRAA Overview
- If a borrower makes 120 qualifying loan payments on a Federal Direct Loan (including Federal Direct Consolidation Loans) while working full-time for 10 years in public service employment, the unpaid balance on the loan is forgiven by the federal government.
- Questions and answers from the Project on Student Debt about Loan Forgiveness for Public Service Employees including what loans are covered: http://projectonstudentdebt.org/initiative_page_view.php?initiative_idx=&initiative_page_idx=22
- Summary of Loan Forgiveness for Public Service Employees including detailed information about consolidation into the Federal Direct Consolidation Loan, and issues to consider when deciding whether to include a Perkins loan in a consolidation loan: www.finaid.org/loans/publicservice.phtml
- Online, telephone, and printable applications for the Federal Direct Consolidation Loan plus information about whether you are eligible to consolidate and which loans can be consolidated.
Other Recommended Resources on Student Loans, Financial Aid and Understanding Your Educational Debt
More information on student loans, financial aid and understanding your educational debt.
- Student financial aid information, advice, and tools: www.finaid.org
- Facts, data, and research regarding student debt and debt relief initiatives: http://projectonstudentdebt.org/index.php
- National Consumer Law Center’s Student Loan Borrower Assistance Project is a resource for borrowers who want to know more about their options and rights: www.studentloanborrowerassistance.org
*Decisions about student debt are highly individual. Each borrower must make his or her own decisions. Equal Justice Works does not offer legal advice. Equal Justice Works makes every effort to ensure the accuracy and completeness of the information we provide, however no guarantee can be made. Equal Justice Works bears no liability for any errors or omissions, for how content is interpreted or used, or for the content of any third-party links. The United States Department of Education has not reviewed our site or its contents nor approved our interpretations.