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Student loan forgiveness plans underused

(MoneyWatch) With the total U.S. student loan debt nearing $1 trillion, the Consumer Finance Protection Bureau is rolling out an initiative to educate borrowers about their rights and options when it comes to repayment.

The effort is primarily aimed at the quarter of the U.S. workforce, 33 million people, who work in jobs which are defined as "public service." The CPFB points out that the legal definition of public service is far broader than people realize: It includes members of the armed forces, teachers, social workers, emergency services personnel and others working for government as well as those working at 501(c)(3) non-profits ranging from health care to the arts.

For example, the Public Service Loan Forgiveness program forgives certain federal student loans after 10 years of on-time monthly payments. There are also programs which allow people to cancel federal Perkins loans.

"People give up higher incomes to serve their city, their state, or their country," CFPB Director Richard Cordray said in a call with reporters Wednesday. "We believe that people who contribute part of their talents, part of the benefits of their education, to society as a whole should not be mired in debt because they stir themselves to the calling of public service."

Cordray hopes that increased awareness of these plans will encourage more students into pursuing careers as teachers or nurses -- just two of the public service jobs facing a huge shortfall in qualified workers in the next decade. According to The Health Resources and Services Administration by 2020 the U.S. will need more than one million more nurses than it is expected to produce. The shortage is expected to be even worse for more skilled nurses. Demand for nurse practitioners and other advanced practice nurses - which require graduate degrees - will likely outpace supply by more than 25 percent by 2025.

In order to get the word out about these loan repayment plans the CPFB is focusing on educating employers about these programs so they can they tell current employees and use them to attract new ones. The agency has created a toolkit, available at, which can be used by both workers and organizations to find out what their options are.

One plan that is available to all borrowers regardless of who they work for: Income Based Repayment. IBR allows borrowers to limit the amount they pay each month to 15 percent of their discretionary income. IBR also forgives loans -- even if they are not entirely paid off -- after 25 years of payment and has other advantages as well. If you have newer federal loans borrowers may qualify for the Pay as You Earn Program, which caps payments at 10 percent of discretionary income and forgives loans after 20 years of payments.

Additional information about both borrowing and repaying students loans can be found here on the CFPB website.

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