Student loan magic bullet or magic BB?
I was just reading an article in the Chronicle of Philanthropy and I thought all of my nonprofit dreams had come true. The headline was “Congress passes bill to forgive student-loan debt for some charity workers.” Was I reading an international version of The Chronicle? Was it AmeriCorp VISTA volunteer day at the Capital and they took over the voting? Or did my government suddenly take an interest in the financial stability of a whole class of workers that have dedicated themselves to the common good? Well, yes and no. Like most laws that seem fantastic on the surface, there are some downfalls. Let me list the many conditions that will make it unlikely that this new law will lift your crushing student loan debt:
- Workers can erase their student loan balances if they work 10 years in a public service career. This includes workers from tax-exempt charities, government employees, public-school teachers, law-enforcement officials, and public-health workers. Employees must be making student loan payments for those 10 years. (Right now you are thinking, “this is me” or “this is me in 9 and a half years”, but wait…)
- The plan only applies to loan payments made after October 1, 2007. You have to be a current student or planning to go back to school to benefit.
- Annual income must be less than $65,000 at the end of the 10 year period.
- Forgiveness only applies to specific job titles like early childhood teachers, foreign language specialists, librarians and nurses.
- It sounds like the maximum loan forgiveness is $5,000.
I am torn between thinking this is a complete waste of legislation that only makes lawmakers feel good and doesn’t improve the issue that they intended to address and believing that this is an important first step which may change the financial status of many social sector workers in the future and may be the solution to the sector’s leadership gap. What do you think?
P.S. If you are a former political science or law student check out www.thomas.gov and look for HR 2669 and let me know if you can find any loopholes.
September 21st, 2007 at 6:58 am
You had me all excited for a bit. The limiting it to specific job titles is asinine. The Development Associate making $28,000 a year at a food bank is just as important to that institution as their social workers or counselors are. And while $5,000 forgiveness is better than nothing, I got out of grad school with $40k in loans, and I feel lucky that was all. And it is pretty crappy of them to limit it to current and future students.
It’s nice that they finally recognize that service to the public sector is important and that encouraging young people to go into it should be a goal, as well as that student loan debt is a big problem that prevents some folks from pursuing a career in public service that they would really prefer if they could afford it. But nice words and empty legislation are useless. I’ll go look for loopholes now…
September 28th, 2007 at 8:49 am
Based on my reading of the statute, I don’t think it’s limited to job titles – in fact, it looks like ANY full-time employee of ANY 501(c)(3) corporation (that’s a tax-exempt non-profit, including food banks) qualifies. Here’s the text defining the “public service” employees who are eligible for full forgiveness:
(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; or
`(ii) teaching as a full-time faculty member at a Tribal College or University as defined in section 316(b) and other faculty teaching in high-needs areas, as determined by the Secretary.’.
Also, the $5000 forgiveness appears to be a separate program. The ten-year requirement leads to full forgiveness of all principal and interest (although at this point, the forgiven amount will be counted as taxable income during the year that it’s forgiven, so prepare for a significant tax bill).
I haven’t studied the bill in any great detail, but I’m an attorney, for what it’s worth. (And an attorney with 120K in student loan debt who planning to switch jobs to a non-profit around…say, next month or so!)