Rep. John Sarbanes, D-Towson, and U.S. Undersecretary of Education Martha Kanter unveiled the “Student Debt Repayment Assistant,” a new way for those working in public service to determine if they are eligible for amnesty on some part of their student loans.
The new web-based system is designed to help current and potential borrowers to evaluate their options for both federal and private student loan programs.
“Education is the key to reigniting the American dream,” Sarbanes announced in a news release.
“I view the federal student loan program as a powerful mechanism to make college affordable for all Americans. We should do everything we can to keep interest rates low, provide reduced monthly payments and target loan forgiveness after graduation,” Sarbanes said in the statement.
In 2007, Sarbanes authored the Public Service Loan Forgiveness Option, a provision of the federal College Cost Reduction Act which provides loan forgiveness for people who enter careers in public service and the nonprofit sector.
Under this act, individuals who work in public service jobs and make 120 monthly loan payments over 10 years can have the balance of their student debt forgiven.
Additionally, those with student loans are also able to enter into an Income-Based Repayment plan that lowers their monthly payments based on a debt-to-income ratio.
Amy Laitinen, senior policy analyst at Education Sector, said the new Student Debt Repayment Assistant addresses the biggest problems of public service loan forgiveness options.
“The overarching concern is that not enough students know about it, or know how to use it, or whether or not loans will actually be forgiven in 10 years,” Laitinen said.
Laitinen said year-to-year changes and a lack of publicity have kept students from viewing forgiveness programs as viable options.
“What they’ve done today is start to make it clearer for students to know what to do. It’s actually a huge service for students who are looking to use forgiveness.”
But some analysts wonder whether public service loan forgiveness is necessary at all.
According to Andrew Gillen, research director for the Center for College Affordability and Productivity, these new measures are an ineffective way to deal with inherent social issues.
“I’m not a fan of these programs. The main issue is that there’s really very little point in treating public service workers as different from other workers,” Gillen said. “If we want to compensate them more, give them more pay.”
Gillen also said that programs like these can lock people into one profession by tying them down with complex paperwork and the threat of a loss of financial aid.
Additionally, he said, the rise or fall of demand for different jobs might mean rewarding people for jobs that are no longer viable.
It will be five years before anyone is eligible under the 2007 policy.
By using the new repayment system, applicants can easily track their potential candidacy for the program by recording payments and registering public service work places that qualify.
Currently, the average student loan is $25,250, according to a November 2011 report from the Institute for College Access & Success’ Project on Student Debt.
The student loan interest rate is set to double from 3.4 percent to 6.8 percent in July, an action President Obama urged Congress to block during last week’s State of the Union address.
The Student Debt Repayment Assistant can be viewed at http://www.consumerfinance.gov/students/repay/.