The College Cost Reduction and Access Act of 2007 (CCRAA) was signed into law in September 2007 and provides for lower monthly student loan payments on federally guaranteed student loans and cancels remaining debt for public servants after 10 years of public service employment.
Resources: Excellent materials on the CCRAA are provided by Equal Justice Works. It includes an overview, checklist, calculator tools to help you determine your own benefits, summaries of qualifying employment and loans, webinars, videos and pod casts on how the CCRRA affects law school students, as well as a student debt forum to post questions, receive answers, and join discussions with others concerned about student debt.
The website of the Fordham Law Financial Aid Office contains an overview and summary of the CCRAA as well as links to the full-text and final regulation, and a scholarly article on the law. The staff of the Financial Aid Office include national experts on the CCRAA who are available for individual counseling sessions with students and alumni.
Summary of the CCRAA (summary based on materials provided by Equal Justice Works): CCRAA helps public service lawyers in two main ways; it:
- Lowers monthly student loan payments on federally guaranteed student loans (Income Based Repayment or IBR); and
- Cancels remaining debt for public servants after 10 years of public service employment (Loan Forgiveness for Public Service)
Income Based Repayment (IBR): The newly created repayment program, income based repayment (IBR), significantly reduces monthly payments for high debt/low income borrowers with “partial financial hardship.” Annual educational debt payments under IBR are capped at 15% of discretionary income (defined as adjusted gross income minus 150% of the poverty level for the borrower’s family size).
Jane Justice owes $100,000 in qualifying debt at 6.8% interest and takes a job paying $40,000 to start. She elects the income-based repayment (IBR) plan. Jane is not married and has no dependents. The 2011 Federal Poverty Guideline for a household of one is $10,890 and in her first year, Jane’s monthly payments under IBR are $300 (as opposed to $1151 under standard ten-year repayment). As Jane gets annual salary increases of 5%, her monthly payments under IBR gradually rise, until in year 10 her monthly payments are $610.
Spouse’s Income and IBR: 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, rather than on the combined income of the borrower and the spouse.
Student Loans Eligible for IBR: All Federal Direct Loans (FDL) and federally guaranteed loans (FFEL) are eligible including: subsidized and unsubsidized Federal Stafford loans; Federal Grad PLUS loans (but not Parent PLUS loans); and Federal Direct Consolidation loans; however only Federal Direct loans (including Federal Direct Consolidation loans) are eligible for Loan Forgiveness for Public Service.
Student Loans Ineligible for IBR: Loans made by a state or private lender and not guaranteed by the federal government are never eligible. Also, Parent PLUS loans are not eligible for IBR. Federal Perkins Loans are only eligible when part of a Federal Direct Consolidation Loan. Borrowers should seek advice before consolidating a Perkins loan because Perkins loans include cancellation provisions.
Loan Forgiveness for Public Service Employees: 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.
Using the same example above, Jane Justice started out owing $100,000 in qualifying debt at 6.8% interest and took a full-time public service job with a starting salary of $40,000 with annual increases of 5%. Jane stayed in public service and paid $49,132 over 10 years under the IBR plan. The federal government cancels $118,868, the principal and interest remaining.
Public service employment: CCCA defines “public service employment” broadly as
“(i) a full-time job in emergency management, government, military service, public safety, law enforcement, public health, public education (including early childhood education), social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy in low-income communities at a nonprofit organization), public child care, public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or at an organization that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code.”
Qualifying loan payment: Only payments on a Federal Direct loan (including a Federal Direct Consolidation loan) are considered qualifying payments. The amount of the payment should be calculated under the Income-Based Repayment (IBR) plan (or the pre-CCCA Income-Contingent Repayment plan). Beginning October 1, 2007, borrowers who have Federal Direct loans (including Federal Direct Consolidation loans) may begin counting time in public service.
Calculate Your Potential Benefits under the CCRAA: There are a number of resources available that will:
- help you calculate your loan payments under CCRAA based upon your own debt and an estimate of your income upon graduation.
- assist you to assess the benefits of CCRAA
- help you consider the relative advantages of various educational loan financing available.
These resources are available on the website of Equal Justice Works. The staff of Fordham Law’s Financial Aid Office are available to meet individually with students and alumni to assist in planning and decision-making.