Relief for Student Debt!

Many thanks to Senator Ted Kennedy and the entire Congress for passing the College Reduction and Access Act (HR 2669)! See the text as passed at Sen. Kennedy's website. It's a nicePDF version so it looks as the slip bill will appear. Evidently President Bush has said he will sign it.

The new law contains great provisions capping the payments on student loans, and offering forgiveness for graduates who work on public interest jobs (including any government and 501(c)(3) organization). Two provisions, Sections 203 and 401 are especially important to law graduates with high debt and low income levels. Parts of the law are effective in October, 2007, some in July, 2008, but some can effect recent graduates.

Senator Kennedy was the primary architect of Section 203, which creates an "income-based repayment" (or IBR) option for repaying student loans. This goes into effect on July 1, 2009. It allows student borrowers to limit their repayments to 15% of their discretionary income (defined ad adjusted gross income minus 150% of poverty level for the borrower's family size). This section appears to apply to ALL government loans -- Stafford and GradPLUS loans. ParentPLUS loans are not covered by this section.

Section 401 allows more rapid forgiveness of loans for borrowers who work full time for at least 10 years in public service jobs. This can combine with the IBR, so that limited repayments will still allow the balance to be forgiven after 10 years.
There is still a huge burden on students, but this is a very important piece of legislative relief!