Federal Loan Repayment Assistance Information

Federal Perkins Loan

Perkins loans are unique among federal loans, because they offer a cancellation provision for persons engaged in selected forms of public service. A Federal Perkins Loan can be cancelled if the borrower is employed in careers including teaching, nursing, the armed forces, full-time employment as an employee of a public or non-profit child or family service agency providing services to high risk children and their families from low-income communities, employment as a qualified professional provider of early intervention services, or if the borrower is a full-time law enforcement or corrections officer. Civil legal aid attorneys that provide legal assistance to families have received cancellation under the provision regarding high risk children and their families from low-income communities.

Prosecutors may be eligible to receive forgiveness under 34 CFR § 674.51. Prosecutors seeking forgiveness should submit a written request for forgiveness to the Perkins Loan Officer at their law school or university. Currently, public defenders do not qualify for loan forgiveness under the Perkins Loan Program. However, the Innocence Protection Act (S. 486), which passed the Senate Judiciary Committee in July 2002, includes a provision to extend forgiveness under the Perkins Loan Program to public defenders.

Federal Agency Employees

The Office of Personnel Management issued rules (5 CFR Part 537) permitting federal agencies demonstrating difficulty in recruiting skilled employees to offer loan repayment assistance. Under the rules, an employee must sign an agreement to remain in the service of the agency for not less than three years to receive the benefit. Agencies may pay up to $6,000 a year per employee, not to exceed a total of $40,000. Although Congress did not appropriate any funds to the agencies to support loan repayment assistance, some agencies, including the Commerce Department, Social Security Administration, Department of Justice and General Services Administration, offer this benefit to employees. For additional information, contact individual federal agencies to determine which agencies offer the benefit to employees or visit the OPM's loan repayment program site at www.opm.gov/oca/pay/studentloan/index.asp.

Senate Employees

In November 2001, President Bush signed legislation establishing a loan repayment program for Senate employees (Public Law 107-68).

U.S. Military

Many branches of the military offer some sort of loan forgiveness. For example:

The U.S. Army Loan Repayment Program provides that individuals enlisted in the Loan Repayment Program ("LRP") earn 33 1/3% or $1,500 (whichever is greater) toward the remaining original unpaid principal on all qualifying loans for each completed year of enlisted active duty up to $65,000. >Qualified loans" include Stafford and Perkins loans; private loans are not covered. The LRP payments will only be authorized toward the remaining original unpaid principal balances when the solider enters active duty. Loans incurred after entering active duty will not be re-paid. Payments are made directly to the lender; therefore payments made under the LRP are subject to federal and state taxes.

Judge Advocate Continuation Pay ("JACP") is designed as an incentive for judge advocates who are already on active duty to remain in service. While continuation is not a loan repayment program per se, it is anticipated that many graduates will use the pay to pay student loans. The JACP authorizes continuation pay of up to $60,000 for active duty judge advocates who have completed their initial active duty service obligation.

In the Air Force, Judge Advocates are paid $25,000 in JACP after they have served their initial four-year commitment, in return for agreeing to serve three additional years (thus guaranteeing they will serve at least seven years on active duty). Between years five and six, judge advocates who have been selected for "Career Reserve Status" (every judge advocate remaining on active duty who will compete for promotion to the rank of major) have the opportunity to agree to serve three more years (beyond seven) and be paid another $25,000. Finally, at the ten-year point, judge advocates may agree to serve two additional years, for another $10,000 in JACP. Therefore, the total payment of $60,000 by the Air Force "guarantees" JAG service until at least twelve years. Judge Advocates who participated in the Funded Legal Education Program are not eligible for JACP.

In addition to the Air Force, other branches, including the Army and Navy, have established Continuation Pay Programs.

The Taxpayer Relief Act of 1997 established a deduction for student loan interest. The student loan interest deduction can reduce the amount of your income subject to tax. The Economic Growth and Tax Relief Reconciliation Act of 2001 amended the Taxpayer Relief Bill of 1997. Beginning January 2002, individuals who paid interest on a student loan may be able to deduct up to $2,500 of the interest paid. For more information, see page 16 of IRS Publication 970.

The ABA has worked to stimulate more LRAPS and scholarships/fellowships provided by law schools, the federal government, state governments, and other private sources. It has also identified two federal legislative priorities: (1) improve the income-contingent repayment option of the William D. Ford Federal Direct Loan Program; and (2) increase to at least $30,000 the amount of unsubsidized Stafford loans that a graduate or professional student may borrow annually.

There are specific factsheets on the two federal legislative changes sought by the ABA:

Income-contingent Repayment Option

Increase Stafford Limits

Learn more generally about the student loan issue as an ABA Legislative Priority.

Join the ABA Grassroots Action Team.