THE FEDERAL STUDENT LOAN FORGIVENESS LAW
THE COLLEGE COST REDUCTION AND ACCESS ACT OF 2007
The College Cost Reduction and Access Act of 2007 helps public service lawyers in two main
1. Lowers monthly student loan payments on federally guaranteed student loans
(Income Based Repayment or IBR)
2. Cancels remaining debt for public servants after 10 years of public service
employment (Loan Forgiveness for Public Service)
Income Based Repayment (IBR)
Congress created a new repayment program—income based repayment (IBR), which significantly reduces
monthly payments for high debt/low income borrowers with “partial financial hardship.”
What will my monthly payment be under IBR?
Annual educational debt payments under IBR are capped at 15% of discretionary income (defined as adjusted
gross income minus 150% of the poverty level for the borrower’s family size). The following example uses
the 2007 Federal Poverty Guideline for a household of one of $10,210.
Example: Jane Justice owes $100,000 in qualifying debt at 6.8% interest and takes a job
paying $40,000 to start.
She elects the income-based repayment (IBR) plan. In her first year, Jane’s monthly
payments under IBR are $309 (as opposed to $1151 under standard ten-year repayment).
As Jane gets annual salary increases of 5%, her monthly payments under IBR gradually rise,
until in year 10 her monthly payments are $526.
How does a spouse’s income affect IBR?
A married borrower who files a separate Federal income tax return will have the amount of the
borrower's income-based repayment calculated solely on the basis of the borrower's student loan debt
and adjusted gross income, rather than on the combined income of the borrower and the spouse.
Which student loans are eligible for IBR?
All Federal Direct Loans (FDL) and federally guaranteed loans (FFEL) are eligible including: subsidized and
unsubsidized Federal Stafford loans; Federal Grad PLUS loans (but not Parent PLUS loans); and Federal
Direct Consolidation loans; however o