Student loan forgiveness and service payback programs provide financial incentives in exchange for a specific work commitment. Loan forgiveness programs repay a percentage of an employee’s student loan after service commences; service payback programs cover a portion of a student’s school costs in return for an agreement to work in a specific job for a specified period of time in the future. These programs have one or more of the following four goals: to provide financial assistance to students to help them with the costs of college, to entice individuals to choose a particular occupation or field of specialization, to entice individuals to work for a period of time in a certain job or underserved region, or to entice individuals to remain in a high need occupation, region or underserved facility. Several bills that would expand existing loan forgiveness or service payback programs or extend them to additional occupational groups have already been introduced in the 109th Congress; over 40 bills were introduced in the 108th Congress.
The first major federal loan forgiveness program, the National Defense Student Loan Program, was authorized by the National Defense Education Act in 1958. It was a loan forgiveness program for public school teachers. Loan forgiveness provisions currently applicable to Federal Family Education Loans and Direct Loans were adopted in the 1998 reauthorization of the Higher Education Act of 1965, as amended (HEA). These provisions are for a teacher loan forgiveness program as well as a demonstration loan forgiveness program for childcare providers. Loan forgiveness is also available for Perkins Loans (low-interest loans made by institutions of higher education to students with financial need) for borrowers who work in specific public service jobs.
In addition to the U.S. Department of Education administered provisions, there are federal loan forgiveness and service payback programs specific to particular occupations or categories of borrowers, for example, the military and health professions. States also offer many loan forgiveness and service payback programs. A survey of 100 state programs in 2000-2001 indicated that 43 states had one or more of these programs. The majority of financial aid administrators interviewed about these programs for this survey reported that they were effective in meeting students’ financial needs and workforce needs. Nevertheless, concerns about the efficacy of these programs were also expressed by financial aid administrators.
In the 108th Congress, legislation was passed (P.L. 108-409, the Taxpayer- Teacher Protection Act of 2004), that will, among other things, temporarily expand student loan forgiveness to $17,500 for highly qualified special education teachers working in elementary and secondary schools, and for highly qualified mathematics and science teachers working in secondary schools. The expanded student loan forgiveness amount applies only to new borrowers on or after October 1, 1998, who borrow before October 1, 2005. As part of its reauthorization of the Higher Education Act, the 109th Congress will likely consider whether these new provisions should be made permanent.
The first major federal loan forgiveness program, the National Defense Student Loan Program, was authorized by the National Defense Education Act in 1958. It was a loan forgiveness program for public school teachers. Loan forgiveness provisions currently applicable to Federal Family Education Loans and Direct Loans were adopted in the 1998 reauthorization of the Higher Education Act of 1965, as amended (HEA). These provisions are for a teacher loan forgiveness program as well as a demonstration loan forgiveness program for childcare providers. Loan forgiveness is also available for Perkins Loans (low-interest loans made by institutions of higher education to students with financial need) for borrowers who work in specific public service jobs.
In addition to the U.S. Department of Education administered provisions, there are federal loan forgiveness and service payback programs specific to particular occupations or categories of borrowers, for example, the military and health professions. States also offer many loan forgiveness and service payback programs. A survey of 100 state programs in 2000-2001 indicated that 43 states had one or more of these programs. The majority of financial aid administrators interviewed about these programs for this survey reported that they were effective in meeting students’ financial needs and workforce needs. Nevertheless, concerns about the efficacy of these programs were also expressed by financial aid administrators.
In the 108th Congress, legislation was passed (P.L. 108-409, the Taxpayer- Teacher Protection Act of 2004), that will, among other things, temporarily expand student loan forgiveness to $17,500 for highly qualified special education teachers working in elementary and secondary schools, and for highly qualified mathematics and science teachers working in secondary schools. The expanded student loan forgiveness amount applies only to new borrowers on or after October 1, 1998, who borrow before October 1, 2005. As part of its reauthorization of the Higher Education Act, the 109th Congress will likely consider whether these new provisions should be made permanent.
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