Student loan negotiators are meeting this week in negotiated rulemaking (negreg) to codify provisions of the College Cost Reduction and Access Act (CCRAA). Yesterday negotiators discussed the Public Service Loan Forgiveness program, which grants loan forgiveness to borrowers who make 120 payments on a qualified loan while employed full-time in a public service job. Borrowers would need to make 120 on-time full monthly payments on an eligible Direct Loan on or after October 1, 2007. The borrower must be directly employed in a full-time - defined by the Department as a minimum of 36 hours per week - in qualified employment.
The Department provided proposed draft regulations to codify the statute. A summary of the discussion from negreg is contined in this article.
Definitions
Qualified employment means:
"a full-time job in emergency management, government, military service, public safety, law enforcement; public interest law services (including prosecution or public defense or legal advocacy in low-income communities at a non-profit organization), public child care, public service for individuals with disabilities and the elderly, public health, social work in a public child or family service agency, public education (including early childhood education), public library sciences, social-based library sciences and other school-based services; or at a non-profit organization under 501(c)(3) of the Internal Revenue Code that is exempt from taxation under 501(a) of the Code, or teaching full-time as a faculty member at a Tribal College or University, and other faculty teaching in high-needs areas, as determined by the Secretary." (The regulations use the definition that appears in statute.)
A nonfederal negotiator suggested that the Department adopt regulations that allow each employer to determine what is considered full-time, not less than what a state may consider full-time. According to the negotiator, this would allow teachers who may go months without working full-time, as well as others, to be eligible for this program even if they aren't working 36 hours per week.
Nonfederal negotiators called the 36 hours arbitrary, especially since the traditional work week is 9:00 to 5:00, minus lunch only comes to 35 hours per week. Individuals with flex schedules, where some weeks they would go over 36 hours and some weeks would go under 36 hours, would also be penalized by the Department's definition. Other nonfederal negotiators pointed out that some low income borrowers might work multiple part-time jobs that would also preclude them from qualifying.
The Department admitted that the 36-hour is arbitrary, but held fast to the idea of having an hour-based standard, something several nonfederal negotiators wanted the Department to negotiate. The Department was concerned with the administrative burden associated with verifying full-time employment if a standard other than hours worked is used.
Nonfederal negotiators also asked the Department to withdraw the proposed regulation that stipulates that qualified borrowers must be "directly employed," which means they must be employed by a qualified organization, not a contractor to that public service organization. NASFAA has received one example of public defenders who are contracted out by local governments and are not considered to be directly employed by a local or state government.
A representative from AmeriCorps also provided public comment to the same effect for the thousands of AmeriCorps volunteers who are not viewed as directly employed by the U.S. government, but are rather viewed as contract employees.
The Department agreed that Congressional intent should include all of these individuals, but asked for regulatory language to clarify these situations. Nonfederal negotiators provided several suggestions, including putting the responsibility to define a qualified job on the employer.
Nonfederal negotiators also asked that borrowers serving in the National Guard be included in the definition of military service. The Department agreed to add the language.
Application Process
After completing all 120 qualifying payments while employed in a qualifying job, borrowers would need to request a loan forgiveness application form from the Department of Education. After a review process the Department will inform the borrower whether their loans will be forgiven.
Negotiators questioned whether it would be better for borrowers to verify their employment throughout the loan process as opposed to proving it in the end. Trying to reconstruct 120 payments of eligibility might be difficult for borrowers who have different jobs over that period. Since the payments need not be consecutive, these payments could also span much more than 10 years.
Since most borrowers who end up qualifying for public service loan forgiveness will have to be in income contingent repayment or income based repayment, one nonfederal negotiator suggested some sort of certification be attached to those certifications.
A nonfederal negotiator also asked whether the Department would inform borrowers throughout the process when they lose eligibility (due to change of employment) and how they could regain eligibility.
Additional Resources
By Justin Draeger
NASFAA Assistant Director for Communications
Jennifer Martin, NASFAA Assistant Director for Professional Assessment, Training, and Regulatory Assistance, also contributed to this article.
Posted 02/06/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
