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Loan forgiveness bill said to fall short

The Baltimore Sun

Congress stripped a major provision from recently passed student loan legislation that would have helped future graduates reduce their debt in exchange for commitments to lower-paying jobs in public service.

The House of Representatives approved a maximum $5,000 in student loan forgiveness for graduates who choose careers in public health, public safety or foreign languages, such as working as a linguist at the Fort Meade-based National Security Agency.

But last week, a conference committee cut the benefit. It did, however, salvage a loan-forgiveness program sponsored by Rep. John P. Sarbanes, a Maryland Democrat, in its report to President Bush.

Bush is expected to sign the legislation, which would take effect in October.

Whether the bill will drive graduates into the public sector - given the conference committee's cuts - remains to be seen.

The public service provisions "are going to help a very, very small percentage of students," said Sarah Bauber, director of financial aid at the University of Maryland, College Park.

"It's not going to have the impact we anticipated, and it's disappointing."

But Jonathan Davidson, Sarbanes' chief of staff, said that the bill "only expands opportunities here" and is better than the very restrictive forgiveness opportunity available today.

To have a portion of a student's loans forgiven under the legislation, the graduate would have to work in the public sector for 10 years and have made 10 years' worth of monthly payments on the loan.

Once that happens, the government would forgive whatever amount is left.

There are three caveats.

First, the forgiveness applies to Stafford Loans. Perkins Loans - federal loans that universities assign to students with "the greatest" need - aren't covered under the College Cost Reduction and Access Act.

Second, the forgiveness program would help public servants who obtained loans through the federal government's direct student loan program, about 9 million people currently, or who later consolidated their loans under the direct program.

The direct loan program is offered at 20 percent of universities nationwide, said Stephanie Babyak, a spokeswoman for the U.S. Department of Education.

But Delicia Reynolds, Sarbanes' legislative counsel, said that students at universities that don't offer direct loans, such as the University of Maryland, could still consolidate under the direct program and become eligible for forgiveness.

Third, the standard payoff period for a federal student loan is 10 years, meaning that some eligible graduates would not have any loans to forgive at the end of a decade of work in the public sector.

Currently, 42 percent of direct loan borrowers have repayment periods of longer than 10 years, according to Rachel Racusen, a spokeswoman for the House's Committee on Education and Labor.

Max Stier, president of the Partnership for Public Service, said that the legislation was an improvement over the current requirement for forgiveness: 25 years of payments.

He argued that the new benefit could drive graduates interested in public service away from 10-year repayment plans and into longer-term loans.

Other changes in the act, such as steep reductions in subsidies for private lenders, also could lead more universities to adopt the direct loan program, Stier said.

"There is no doubt there is more to be done, but you can't let the perfect be the enemy of the good," he said.

Bauber said that the average federal student loan debt of a University of Maryland graduate is $10,000.

"If the legislation wouldn't have been changed, Congress could have helped some of our students eliminate 50 percent of their indebtedness," Bauber said.

"That would have positively impacted students, and that's what is needed."

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