College Cost Reduction and Access Act Helps with Federal Loans

New program to kick in

The College Cost Reduction and Access Act went into effect in 2007, but some of the provisions are still kicking in. Specifically, The Income-Based Repayment Plan kicks in on July 1.

The part of the College Cost Reduction and Access Act, which is already in effect, is the The Public Service Loan Forgiveness Plan.

Income-Based Repayment Plan

First off, the College Cost Reductions and Access Act only applies to federal loans. If you got student loans from a private loan company, these programs can’t help you, unfortunately.

But every little bit helps, right? The Income-Based Repayment Plan caps payments on federal student loans based on the family size and income. Most eligible borrowers will get their payments capped at only 10 percent of their income. For low-income families, the payments could be even lower.

In the long run

The Income-Based Repayment plan also forgives any remaining debt after the borrower has made payments for 25 years. This is similar to a provision in The Public Service Loan Forgiveness Plan, which forgives any remaining debt after 10 years, starting in October 2007.

The Public Service Loan Forgiveness Plan is designed to help and encourage public service workers. Degrees to work in the public service sector can often be very expensive, and salaries are average or lower than average.

More on Public Service Loan Forgiveness

In order to qualify for The Public Service Loan Forgiveness Plan, borrowers must work in public service full time for 10 years. As long as public service workers are making regular payments and working full time, any debt to the feds will be forgiven after 10 years.

Of course, this provision also applies only to funding obtained through the Federal Direct Student Loan Program or Federal Family Education Loan Program.

How to apply

You can apply for the Income-Based Repayment Plan starting July 1. First, visit Equal Justice Works. There, you can use calculators and worksheets to find out if you’re eligible and what you can expect your payments to be.

If you find out that you qualify, you can contact your loan provider directly. Equal Justice Works also says it will provide more specific information regarding how to apply for this program after July 1.

Public service workers, sit tight

Because Public Service Loan Forgiveness won’t actually forgive any loans until at least 2017, there isn’t a way to apply for it yet. Equal Justice Works says:

Unfortunately, the Department of Education does not currently have a formal process for “registering” for public service loan forgiveness, or for confirming eligible employment. However, we are putting substantial pressure on the Department to put an eligibility confirmation process in place swiftly so that borrowers can make good financial decisions regarding their student loans. In the meantime, save records that identify your employer and the dates and hours of your employment.

Best of both worlds

If you work in public service, you can still take advantage of the Income-Based Repayment Plan. This will significantly help workers in public service who have low paying jobs.

If a public service worker qualifies of the Income-Based Repayment Plan under the College Cost Reduction and Access Act, their payments will be reduced to at most 10 percent of their income. As long as they make those payments for 10 years while working in public service, they’ll have no more federal debt after that.