The College Cost Reduction and Access Act (CCRAA) of 2007 contains two provisions that can be very helpful to recent (and some not so recent) law graduates working at least 30 hours per week in a public service job: 1) Income Based Repayment and 2) Public Service Forgiveness.
Please note that you do not have to be a public interest lawyer to qualify for the public service forgiveness program. If you are a public defender or prosecutor, work for any 501(c)(3) organization, or work for a local, state or federal government department or agency, then you may qualify.
Income Based Repayment
Here is an example of how Income Based Repayment (IBR) works (courtesy of Equal Justice Works):
Jane Justice owes $100,000 in qualifying debt at 6.8% interest and takes a job paying $40,000. She elects Income Based Repayment. In her first year, Jane’s monthly payment under IBR is $309, as opposed to $1151 under a standard ten year repayment plan. As Jane receives annual salary increases of 5%, her monthly payments under IBR gradually rise, until in year 10 her monthly payments are $526.
Public Service Forgiveness
Another part of the Act is public service forgiveness. If a borrower elects IBR and makes ten years of payments while engaged in full-time public service, the unpaid balance is forgiven by the federal government.
Example: Jane Justice from the example above stayed in public service for ten years and paid $49,132 during that time toward her federal student loans through the IBR plan. The federal government then cancels $118,868 (the principal and interest remaining on her loans).
The following websites provide detailed information about the Federal Public Service Loan Forgiveness Program: