What does it mean for nonprofit employees?
Nationally, student loan debt now exceeds credit card debt at a staggering one trillion dollars. If you graduate and work on Wall Street, or other highly-compensated professions, paying off your student loans may be chump change. However, if you graduate and dedicate your career to public service, it may seem like you’ll be paying for those student loans forever.
New federal legislation (H.R. 4179) has been proposed that would extend the current Student Loan Forgiveness program in a way that could increase the benefit to nonprofit employees by cutting the number of require payments in half. Not only do borrowers benefit from this, but the nonprofit sector benefits by attracting talent that might have otherwise – for financial reasons – not chosen a nonprofit career. The College Cost Reduction and Access Act of 2007 (CCRAA) extended the Loan Forgiveness program to all full-time employees of 501(c)(3) organizations. The program had previously been limited to specific public service professions.
In the Loan Forgiveness Program full-time employees of 501(c)(3) organizations who made 120 payments on their qualifying loans (coinciding with their full-time employment) would have the remainder of their student loan debt forgiven.
The new legislation is proposing:
- A cap on interest rates on student loans
- Extending the 10 year plan to any person who has paid 10 percent of their discretionary income toward their qualifying loans for 10 years. There is no public service requirement for this plan.
- The Public Service Loan Forgiveness would have the number of payments required cut in half. So, five years of full-time employment in public service while paying on qualifying loans would mean that the remainder of the debt is forgiven.
So, what’s the catch? Qualifying loans are Federal Direct Loans. Payments that you make while your loans are not under the Federal Direct Loan program do not count towards the forgiveness program. Many types of existing loans can be consolidated into the Federal Direct program.
Learn how to consolidate your loans into the qualifying program.
Read more about the proposed legislation.
Read the FAQs about Public Service Loan Forgiveness