College Cost Reduction and Access Act

Last week, Congress passed the College Cost Reduction and Access Act, which President Bush has indicated he will sign. It has been hailed by the House of Representative's Education and Labor Committee as "the single largest investment in higher education since the GI Bill." Interestingly, a separate press release from that committee explains that this "investment" actually comes "at no new cost to taxpayers." A cynical soul might point out that this is not so much an "investment" as is it a "cost reallocation," but I suppose the larger (and more important) question is whether the act will be beneficial.

As with much legislation passed by Congress, the act is long and contains numerous provisions. Text of the full bill is available here (click on "Text of Legislation," then choose option #6--the version "Enrolled as Agreed to or Passed by Both House and Senate"). For purposes of this post, I will focus on two provisions that might affect law students and recent law graduates.

Section 203: A High Debt/Low Income Provision

Section 203 of the act would limit loan repayments to 15% of "discretionary income," as that term is defined in the act. Without getting into a great deal of detail or math, the point is that monthly payments on student loans, which by the end of law school can rival a mortgage, will be capped, with the cap level depending in large part on the loan holder's discretionary income. So if you want (or have) to take a lower paying job, then your loan repayments cannot eat up all of your income.

On the one hand, this means that payment schedules might be stretched out for a long, long time--just like if you were to make the minimum payment on existing credit card debt. On the other hand, at least it helps manage cash flow. And on the third hand (there's no limit to the number of hands when discussing legal issues), any remaining principle is forgiven after 25 years.

That third hand provision is astounding, in a good way. I wonder exactly on whom such costs will fall, and how that jibes with the Edlabor Committee's claim that the legislation imposes no new costs on taxpayers. It certainly imposes a cost on somebody. But as worded, this section looks like it will operate as both a protector of loan recipients' cash flows/discretionary income, and also as a loan reduction provision.

Section 401: Accelerated Debt Forgiveness for People in "Public Service Jobs"

Section 401 allows people who intend to work for 10 years or more in a "public service" job to obtain debt forgiveness after 10 years, instead of 25. For someone who has funded expensive college and law school educations with student loans, that is an enormous write-off. There are of course technical requirements and limitations, which I do not want to go into here. But it is worth setting forth the definition of "public service job" in full. It is quite broad.

PUBLIC SERVICE JOB- The term `public service job' means--

(i) a full-time job in emergency management, government, military service, public safety, law enforcement, public health, public education (including early childhood education), social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy in low-income communities at a nonprofit organization), public child care, public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or at an organization that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code; or

(ii) teaching as a full-time faculty member at a Tribal College or University as defined in section 316(b) and other faculty teaching in high-needs areas, as determined by the Secretary.

So clearly, a lot of jobs, including jobs in the public interest legal sector, are covered. There are many law schools in the U.S., including my school, that have started offering Loan Repayment Assistance Programs, or LRAPs, which are intended to help graduates who pursue low-paying public interest sector jobs. These programs should stay in place (at least I hope they do). And perhaps the College Cost Reduction and Access Act might be best viewed as a great big federal LRAP program--one that is not limited to law graduates. Which is a good thing.

Of course, being a professor of Administrative Law, I will be very interested to see the regulations that are promulgated pursuant to this statute, and exactly how the act's provisions play out at the regulatory level. As any lawyer or law student knows, the devil is in the details.


NOTE: For more details concerning the act, I refer you to a soon-to-be-available article by Professor Philip Schrag of the Georgetown University Law Center. Professor Schrag currently serves as Vice-Chair of the Committee on Government Relations and Student Financial Aid, which is part of ABA's Section of Legal Education and Admission to the Bar. He has been very involved in this area, and he has drafted an excellent technical analysis of the act, which will be posted online at the Social Science Research Network (SSRN) and also will be published in the Hofstra Law Review in the fall of 2007. (I have an advance copy that he has requested not be made available online, and it's very good.)

ADDITIONAL NOTE, SEPT. 18, 2007: Since the original date of this post, Professor Schrag has posted his article online here.