July 5, 2018
Law school is expensive and, oftentimes, loans can be a prohibitive factor for those considering a career in public service, such as with a legal aid office. The average debt for a California ABA-accredited law school graduate is $142,826, which is 27% higher than the national average. Many aspiring and current legal aid lawyers have educational loans and paying these off is a huge concern. One important discussion within loan repayment for legal aid attorneys is loan forgiveness for public service. While many of us have heard about loan forgiveness, it is easy to get lost and overwhelmed. This post seeks to briefly summarize the current state of loan forgiveness for public service attorneys.
What is the difference between loan forgiveness and LRAP?
LRAP refers to the loan repayment assistance programs. LRAP may come from your school, employer, or the state. First, around twelve California law schools offer LRAP. Most of these programs have an income cap at $50,000 annual income. Second, LRAP can be employer-based. As of 2010, 25% of legal aid offices (primarily larger ones) offered an employer-sponsored LRAP program. Third, at the state level, California has a public interest attorney loan repayment program. The criteria for this program include the applicant’s need, commitment to public interest law, interest in working in an area of the state where there is a need for public interest attorneys, and academic achievements.
What is loan forgiveness and how does it work?
Loan forgiveness is the process through which certain federal loans are forgiven by the federal government. Loan forgiveness applies to Federal Direct Loans. A Federal Direct Loan comes directly from the US Department of Education. To figure out what kinds of loans you have, you can go to the National Student Loan Data System online. If you do not have federal direct loans (e.g. FFEL loans), you can consolidate them into direct loans at studentloans.gov.
If you make 120 qualifying loan payments while working full-time in a qualifying public service position after October 1, 2007. This is ten years worth of payments. This forgiveness is not taxable. The federal government will then forgive the balance (principal and accrued interest) remaining on your Federal Direct Loans.
In terms of qualifying public service positions, there are five kinds: Government, 501(c)(3) nonprofit, AmeriCorps, Peace Corps, and public service organizations (private nonprofits). A legal aid office would qualify as a nonprofit, and you can hold any kind of job in that nonprofit. You must work full-time, but full-time is whatever the employer considers full-time. This would also include working multiple part-time positions that add up to at least 30 hours per week. Last, you can move around between jobs and still qualify.
You must be in a qualifying repayment plan, such as an income-contingent repayment plan or an income-based repayment plan. The 120 payments do not need to be consecutive, which means you can make payments as an attorney at a nonprofit, switch to the private sector (when payments will not go toward the ten year total), and then go back to a nonprofit (when payments will start going toward the total again). Additionally, if you are enrolled in an income-based repayment plan and are still repaying loans after 25 years, the remaining principal and interest will be cancelled (if you qualify as a “new borrower” because you took out your first federal loan after July 1, 2014, this time period drops to 20 years).
Last, you should regularly be submitting the “Employment Certification for Public Service Loan Forgiveness” form, from the Department of Education. This will help you with tracking qualifying employment and payments. After making the 120 payments, you will need to fill out the “Application for Forgiveness” form to receive forgiveness.
Is public service loan forgiveness under threat?
At the moment, public service loan forgiveness is not capped (i.e. there is no limit on how much can be forgiven). However, loan forgiveness is being targeted at the federal level for limitation and even elimination. There is now legislation in the House (the “PROSPER” Act) to eliminate public service loan forgiveness. There’s also a separate bill in the Senate that could cap loan forgiveness, limit the number of professions that could use it, or require means-testing. Altogether, public service loan forgiveness, while still around, faces serious legislative threats in Congress.
While this program is being targeted for elimination, there is an ongoing fight, including the advocacy efforts of Equal Justice Works (EJW) and the National Legal Aid & Defender Association (NLADA), to ensure its preservation.
- The California Association of Nonprofits is offering a webinar on August 1st about loan forgiveness, called “How Nonprofit Staff Can Get Student Loan Forgiveness.” To learn more, go to: https://calnp.memberclicks.net/index.php?option=com_mcform&view=ngforms&id=47448#/
- The information summarized in this post comes from Equal Justice Work’s excellent resources on student debt relief, available at: http://www.equaljusticeworks.org/student-debt
- Federal Student Aid: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service
- NLADA: http://www.nlada.org/issues-and-initiatives/law-school-loan-forgiveness