September 20, 2007 | Read Time: 2 minutes
Some charity workers will not have to pay back all of their students loans under legislation passed by Congress this month.
The provision — part of a package of measures to cut subsidies to student lenders and shift the money into student-aid programs — allows borrowers to erase their loan balances after 10 years of payments if they have worked during that time in a “public service” job.
“Public service” is defined to include employees of nonprofit legal-advocacy groups and organizations recognized by the Internal Revenue Service as tax-exempt charities. It also covers groups such as government employees, public-school teachers, law-enforcement officials, and public-health workers.
The bill (HR 2669), a compromise between the House and Senate versions, is a victory for charities that lobbied Congress to lift the loan burden on people who choose nonprofit careers. The original House version of the bill contained a provision that included charity workers, but the Senate version affected mostly people in government jobs.
The Nonprofit Sector Workforce Coalition — composed of more than 50 nonprofit groups, foundations, associations, and academic centers — argued that the provision would help attract workers to relatively low-paid nonprofit careers.
Nonprofit workers will have their loan balances excused only if they participate in specific repayment plans outlined in the legislation — including those allowing borrowers with low incomes to make small payments over a long period, say 25 or 30 years.
The benefit applies only to loans made directly by the federal government, although borrowers could reconsolidate other loans into federal direct loans to qualify. It applies only to payments made after October 1, 2007.
The new public-service provisions are actually expected to save the federal government money — an estimated $110-million over 10 years — by encouraging borrowers to move into the direct-loan program, which is cheaper to operate than subsidizing private lenders, Rachel Racusen, a spokeswoman for the House Education and Labor Committee, said.
President Bush is expected to sign the measure.
