« Courts - North Carolina Judge reprimanded for ex parte "friending" of attorney for the defense | Main | Ind. Decisions - Transfer list for week ending May 29, 2009 »

Monday, June 01, 2009

Law - "Recession Imperils Loan Forgiveness Programs"

The NY Times has this story, by Jonathan D. Glater, on May 26th. A quote:

From Kentucky to Iowa to California, loan forgiveness programs are on the chopping block. Typically founded by their states to help students pay for college, the state agencies and nonprofit organizations that make student loans and sponsor these programs are getting less money from the federal government and are having difficulty raising money elsewhere as a result of the financial crisis.

The organizations say the repayment programs have been hurt by a broader effort by Congress to tackle the high cost of the federal student loan program by reducing subsidies to lenders.

Curbing the programs will make it harder to lure college graduates into high-value but often low-paying fields like teaching and nursing. * * *

The Kentucky Higher Education Student Loan Corporation is at the extreme in cutting payments to people in midstream who have already finished their educations and are repaying loans, but organizations in many other states have curtailed their new offers to prospective teachers, nurses and others.

On May 29th the NY Times had this story, headed "Students Relying on Loans Wonder Whether Forgiveness Will Last." The long article was reported by Jonathan D. Glater, Ron Lieber, Tara Siegel Bernard and Paul Sullivan and written by Mr. Glater and Mr. Lieber. Some quotes:
If you want to become a public defender, Georgetown University can be a great place to get your legal education. So Heather Gatnarek expects to take on well over $100,000 of debt to get her law degree there and hopes to graduate in three years.

Here’s the problem, though. She’s relying on a new federal program that forgives part of the student loan debt for graduates who enter public service fields. And she was scared out of her mind when she read a New York Times article on Wednesday on problems in Kentucky, where significant cuts in one of its loan forgiveness programs have put thousands of indebted public school teachers and nurses in a painful financial squeeze.

“I would be completely up a creek” without a loan forgiveness program, Ms. Gatnarek said. “I don’t know what I would do. Marry someone rich, I guess. People say that I could just do corporate law for a few years, but I wouldn’t last two days.” * * *

The good news here is that the federal Department of Education says that almost all its loan forgiveness programs are safe. “It doesn’t depend on some future Congress for us to come through on most of these,” said Robert Shireman, deputy undersecretary of education. “The majority of them get appropriations for the life of the programs.”

But many states say that financing their loan forgiveness programs depends on state budgets. Given declining tax revenues, that doesn’t inspire much confidence. On Thursday, for instance, Gov. M. Jodi Rell of Connecticut proposed cutting the state’s minority teacher grant program, which awards a stipend that is intended to help students pay off their loans, said Constance Fraser, a Connecticut Department of Higher Education spokeswoman.

From there, the article becomes pro-active, addressing students directly:
So this is where you come in. We’ve created an interactive table at nytimes.com/yourmoney with everything we’ve found so far. If your lender (or law firm or other employer) is not there and you’d like us to ask them to state whether they intend to stand behind their loan forgiveness program, write to yourmoney@nytimes.com.

We intend to finish this database in the next few weeks and then leave it up, with updates, as a sort of reality check.

Meanwhile, a few tips for those of you who are thinking about borrowing a big pile of money or are in the middle of doing so. If you live in a state where loan forgiveness may be in jeopardy, call your state representatives and read them the riot act. It’s hard to imagine that the cuts in the Kentucky program, for instance, will stand. Ken Winters, a Republican state senator there, said he expected the issue of financing for the program to come up in January. We’ll be watching.

Also, ask tough questions when any program is making what seems to be a promise on loan forgiveness. Which loans are eligible? All student loans or only certain types? Is there a limit on the debt that can be forgiven? Is the program guaranteed? By whom? With what funds? For precisely which kinds of public service? Must you apply, and is it selective? And finally, is there a federal program that may make up for some of your state’s forgiveness, even if the federal benefits aren’t as generous?

We hate to get all “X-Files” on you, but Trust No One. Sure, The Truth May Be Out There, but it sure seems as if the truth can change in ways that can cost innocent public servants tens of thousands of dollars.

So far, the Indiana section of the interactive table is blank.

Thanks to Above the Law for highlighting the NYT stories.

As I read the Times story, federal student loan forgiveness programs, such as the John R. Justice Prosecutors and Defenders Act (see earlier ILB entries about this program), are not in danger.

Posted by Marcia Oddi on June 1, 2009 01:59 PM
Posted to General Law Related