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Student Loan Forgiveness Programs Being Cut

By CityTownInfo.com Staff

May 29, 2009

Student loan forgiveness programs--which aim to attract workers to lower-paying but in-demand fields such as teaching and nursing--are being scaled back significantly in several states.

The New York Times reports that the programs are being cut because the state agencies and nonprofit organizations who run the plans are receiving less from the federal government and have been unable to raise the funds elsewhere due to the economic climate. The Kentucky Higher Education Student Loan Corporation has even gone so far as to cut payments to people who have already finished their educations and are repaying loans.

"The loan forgiveness played a large role in me deciding to go into this field," said Travis Gay, a special education teacher who was interviewed in the Times and previously quoted in the Lexington Herald-Leader. He and his wife, also a special education teacher who took advantage of the loan forgiveness program, now face unexpected loan payments of about $800 to $900 per month and are debating whether to sell their three-bedroom house.

"I paid for my entire master's degree out of the program, books and all, and so did my wife," he said. "We were told, 'It's something you can count on.' But then it was just gone."

Loan forgiveness programs have long been lauded by experts as a sensible option for people who wish to be trained in valuable fields that offer relatively low wages. Even though the article in the Times spoke only of state programs, some have reacted by questioning the assurances of similar federal loan forgiveness plans. The new Income Based Repayment beginning this July, for example, offers loan forgiveness for those in public service jobs over ten years.

"I wonder what reassurances the Department of Education can provide to those borrowers who see the headlines today and wonder whether this specific forgiveness program can be counted on for the long-term," writes the Student Lending Analytics Blog.

Other loan forgiveness programs on the chopping block include the New Hampshire Higher Education Loan Corporation, which has suspended its program for teachers; and the Pennsylvania Higher Education Assistance Authority, which has shelved its aid for nurses and people called to active duty in the military. Similarly, the Los Angeles-based ALL Student Loan ended a program for nurses last year, and Iowa Student Loan reduced the maximum amounts offered to teachers and certain types of nurses.

Some fear that that cutting such programs will make it more difficult to lure college graduates into such fields. "You're going to diminish the quality of the candidates who are thinking, 'Do I take my skills in math and science into industry or do I take them into the classroom?'" noted Tracey L. Bailey, director of education policy for the Association of American Educators, who was quoted in the Times.

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