STUDENT LOANS

[Professor]

Congress Approves Loan Forgiveness Program for Nonprofit Employees
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A student loan forgiveness program for nonprofit employees is now a reality! On September 7, both the U.S. Senate and House of Representatives overwhelmingly approved a college tuition assistance bill that establishes a student loan forgiveness program for public service employees, including people who work at nonprofits for 10 years. The votes came two days after a Congressional conference committee, which included Sen. Richard Burr and Rep. Virginia Foxx of N.C., met to work out differences in the House and Senate versions of a college tuition assistance bill. President Bush signed the legislation into law on September 27. This legislation is an important victory for the nonprofit sector, because it will make nonprofit jobs a more attractive option for talented young college graduates.

The N.C. Center for Nonprofits strongly supports the student loan forgiveness program that the conference committee approved. This summer, the Center sent letters to Sen. Burr, Rep. Foxx, and Massachusetts Sen. Edward Kennedy, the sponsor of the Senate student aid bill, explaining how the loan forgiveness program will benefit the nonprofit sector. A sample of our letters to legislators is available here.

Background

In July, the U.S. Senate passed the College Cost Reduction Act (H.R. 2669), which establishes a student loan forgiveness program for public services employees. Unlike the House version, the Senate bill didn’t include jobs with Section 501(c)(3) nonprofits among the types of “public service” positions qualifying for loan forgiveness. The House version made employees eligible for forgiveness of federal student loans after 10 years of service with 501(c)(3) nonprofits. This program would make nonprofit careers a more feasible and attractive option for many college graduates with student loan debt. The conference committee approved the House version of this provision, and this version was included in the final legislation passed by Congress.

Effective Date and Eligible Student Loans

The loan forgiveness program is effective for student loan payments made after October 1, 2007. Nonprofit employees will be eligible for loan forgiveness after making 120 monthly payments after this date, while employed by nonprofits or in other public sector jobs. Eligible student loans include Federal Direct Stafford Loans, Federal Direct PLUS Loans, Federal Direct Unsubsidized Stafford Loans, and Federal Direct Consolidation Loans. In addition to Section 501(c)(3) nonprofits, public service jobs eligible for loan forgiveness including positions in government, the military, public education, emergency management, law enforcement, public health, social work, and public library service.

Other Provisions of the Legislation

The College Cost Reduction Act has been described by the House Education and Labor Committee as “the single largest increase in college aid since the GI Bill.” In addition to creating the student loan forgiveness program, the legislation includes several other provisions designed to make higher education more affordable. These measures include:

* Reducing interest rates on subsidized student loans.
* Limiting student loan payments based upon borrowers’ income.
* Increasing the maximum Pell Grant award and expanding eligibility for the Pell Grant.
* Creating a tuition assistance program for undergraduate students committed to teaching in low-income public schools.
* Establishing matching challenge grants for states and certain educational nonprofits for activities targeted to making higher education more accessible for low-income students and first-generation college students.