Gov't Urging 25% of U.S. Workforce to Strive for Student Loan Forgiveness

Susan Jones | August 29, 2013 | 10:16am EDT
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Head Start workers are among the many public service employees who may be eligible to have their federal student loans forgiven. (AP File Photo)

( - There's no student loan forgiveness program for mothers who raise their own children, but there is for some daycare workers; and student loan forgiveness may be yours if you work for the government in some capacity, but not if you earn a low salary in the private sector.

The federal Consumer Financial Protection Bureau (CFPB) is trying to make it easier for people in certain jobs -- teachers, nurses, social workers, police and firefighters, and federal, state and local government workers -- to understand the route to student loan forgiveness.

On Wednesday, the CFPB released a "toolkit" to "empower" school districts and other public service organizations to help their employees understand how they can pay off their student loans or have them forgiven. That toolkit asks employers to pledge that they will talk to their workers about student debt, help them understand their options, and assist them in enrolling in student-loan repayment benefits.

Richmond Public Schools in Virginia and the City of South Bend, Indiana, are the first public employers to sign the pledge.

Up to a quarter of the U.S. workforce is in public service and may be eligible for existing student loan debt-forgiveness programs, the CFPB said.

“Our young people should not be mired in debt because they stir themselves to the call of public service. They deserve to know all their options,” said CFPB Director Richard Cordray. “Our toolkit and pledge can be a win-win for employers, the public they serve, and their employees who are facing student debt loads that are imposing unprecedented burdens upon this generation.”

In 2007, Congress created the Public Service Loan Forgiveness program for people with at least ten years of public service who have made 120 consecutive monthly student loan payments.

The CFPB's push for loan forgiveness is part of an effort to attract people to professions that face looming workforce shortages in the years ahead or that offer relatively low starting salaries, making debt repayment more difficult.

The toolkit notes that the U.S. will need 435,000 new teachers by the end of the decade to make up for retiring baby boomers; Likewise, it anticipates a shortage of one million nurses by 2020.

And for new employees in other professions -- police officers, social workers, firefighters, EMTs, paramedics, and soldiers -- the toolkit says low starting salaries and low wage growth "make repaying student debt a daunting obstacle."

The toolkit -- titled the "Employer’s Guide to Assisting Employees with Student Loan Repayment" -- offers practical advice to public sector employers and employees, advising that an early start on loan repayment can save a borrower thousands of dollars.

It includes an "action guide' for employers, explaining "the steps they should take" to inform employees about repayment plans. It also includes an action guide for borrowers, telling them what their options are and how to qualify for benefits.

"Qualifying for these benefits can be challenging; but, with a little bit of guidance, employers can help their employees manage their loans, make smart choices early and stay on the path to loan forgiveness. In effect, this is an opportunity for public service employers to provide a valuable fringe benefit at little to no cost," the toolkit says.

Only federal direct loans are eligible for public service loan forgiveness. But employees with other federal loans that originated under the Federal Family
Educational Loan (FFEL) program or the Perkins loan program, may be able to consolidate those loans into a new direct loan to qualify.

CFPB says the "path to loan forgiveness" presents some risks for borrowers: "Because this program is an “all-or-nothing” benefit, it is important for your employees to understand that they must make 120 on-time, qualifying monthly payments in order to obtain loan forgiveness. If your employee leaves public service even one monthly payment short of the required 120, he or she will not be eligible for loan forgiveness and will be required to repay in full."

People employed in the following public service organizations may be eligible for student loan forgiveness:

-- A government organization (including a Federal, State, local or Tribal organization, agency or entity; a public child or family service agency; a Tribal college or university);

-- A non-profit, tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, as long as that employment does not include time spent on religious instruction, worship services, or any form of proselytizing;

-- A private, non-profit organization (that is not a labor union or a partisan political organization) that provides at least one of the following public
Emergency management;
Military service;
Public safety;
Law enforcement;
Public interest law services;
Early childhood education (including licensed or regulated child care, Head Start, and state-funded pre-kindergarten);
Public service for individuals with disabilities and the elderly;
Public health (including nurses, nurse practitioners, nurses in a clinical setting, and      full-time professionals engaged in health care practitioner occupations and health support occupations, as such terms are defined by the Bureau of Labor Statistics);
Public education;
Public library services;
School library services; or
Other school-based services;

The CFPB recently estimated that outstanding student loan debt is approaching $1.2 trillion.

As has reported, the Consumer Financial Protection Board, created by the Democrats' Dodd-Frank law, is neither funded by nor accountable to Congress. It is funded directly by the unelected Board of Governors of the Federal Reserve. Nor was its director, appointed by President Obama, subject to Senate confirmation.

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