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Tucked inside the voluminous health care reform bill passed last month is some good news for future law students and others who take out massive loans to finance their education. The legislation includes several improvements to the loan forgiveness provisions introduced in the 2007 College Cost Reduction & Access Act, which went into effect last year. Qualified borrowers will see lower monthly loan payments under the new rules, and some will see their student debt burdens forgiven sooner. Current law students won’t benefit from the beefed-up provisions, however. The changes included in the health care reform bill don’t go into effect until 2014, and even then many law students won’t qualify until 2018 or later. “This is a good improvement, but it’s not going to take effect for some time,” said Georgetown University Law Center professor Philip Schrag, who has written about the College Cost Reduction & Access Act. “There is a nice prize dangling, but it’s pretty far down the road.” The law is intended to help borrowers manage their student debt — a significant burden for law graduates that can run to $100,000 or more. The 2007 legislation made two significant changes: It capped the monthly federal loan payments based on the borrower’s income, and it established that federal loan debt balances would be forgiven after a certain period of time. The existing income-based repayment option caps monthly loan payments at 15 percent of a borrower’s discretionary income. The health care reform bill drops that cap to 10 percent. Schrag said the change will reduce monthly payments by about one third. That savings will be particularly important for graduates who go on to qualified public interest jobs, Schrag said. Graduates who stay in such jobs for a decade or longer and make 10 years of income-based loan repayments will see the remainder of their student debt forgiven by the government. The new 10 percent cap means that a significantly larger percentage of their student loans will be forgiven, Schrag said. Even law graduates who don’t go on to public interest careers may benefit. They, too, may opt for income-based repayment and have their monthly payments capped at 10 percent of their discretionary income. The existing law calls for the government to forgive student loan balances after 25 years of payments. The new legislation reduces that to 20 years. In yet another change, the new legislation eliminates the middleman role played by private loan providers in the administration of federal loans. Starting this July, the federal government will loan students money directly — a modification of the current system in which some loans are made directly by the federal government and others are not. This change will make it less complicated for law graduates to take advantage of the College Cost Reduction & Access Act, since only direct federal loans qualify for federal loan forgiveness, said Heather Jarvis, a senior program manager at Equal Justice Works, an organization that encourages attorneys to undertake public interest careers. Currently, law graduates who want to take advantage of federal loan forgiveness must make sure they have direct federal loans. If their loans don’t come directly from the federal government, they must consolidate their loans to ensure they qualify. Many graduates don’t realize that, Jarvis said. Private students loans don’t qualify for federal loan forgiveness under the existing or the newly passed rules. Only students who have never before taken out a federal student loan will be eligible. For example, a student entering law school in 2014 would not qualify if he had taken out government loans to pay for his undergraduate education. Jarvis estimated that the first law graduates to benefit from the more favorable provisions would likely be the graduating class of 2020. Still, a small number of law students who didn’t take out federal loans in their undergraduate years may benefit earlier, she said. “I think this will make student loans more affordable for many people,” Jarvis said. “However, I’m disappointed that the changes won’t come soon enough to help the borrowers who are struggling right now.” Although the College Cost Reduction & Access Act has been in effect for nearly a year, many students, recent graduates and law school administrators still don’t know about it or understand it, Jarvis and Schrag said. “Progress has been made, but I think more education on loan borrowers is absolutely critical,” Jarvis said. “The program is overly complicated, and there is nothing automatic about these benefits. More needs to be done to help student loan borrowers to understand what needs to be done to manage their debt.”

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