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For those of you who are interested, but not wanting to be involved in the petition thread:
United States Senate
Lisa Murkowski
Alaska
Thank you for contacting me to express your concern about a provision in the College Cost Reduction and Access Act that recently was signed into law (Public Law 110-84) which eliminated the economic hardship loan repayment provision for medical students. I appreciate the opportunity to respond to your concerns.
As you know, prior to the enactment of the College Cost Reduction and Access Act, borrowers were eligible for an economic hardship deferment of their federal student loan payments if their income was below 100 percent of poverty for a family of two, or if their income was below 220 percent of poverty for a family of two and their debt exceeded 20 percent of their income. This provision was known as the 220-20 deferment formula. Some medical residents took advantage of the 220-20 deferment formula to defer their loans while in residency.
The College Cost Reduction and Access Act changed the definition of economic hardship to allow individuals to be eligible for deferment if their income is below 150 percent of poverty, based on family size. The Act also includes an Income-Based Repayment plan, under which repayment is limited to 15 percent of the borrowers discretionary income. The Act also provides loan forgiveness for Direct Loan borrowers (or those who consolidate their loans under the Direct Loan Program) who work in a public service or non-profit job, such as the Indian Health Service or a public clinic, for ten years.
Given the high cost of the 220-20 deferment formula, it was eliminated from the Act in order to help pay for increasing the maximum Pell Grant award and other borrower benefits. Realizing, however, that this could have an unintended negative effect on medical residents and other similarly situated students, the Act allows borrowers repaying under the Income-Based Repayment plan to have three additional years (on top of 3 years of deferment) of interest paid on federal subsidized loans at any time the borrower elects. These additional three years of deferment cover the traditional residency period.
In addition, the U.S. Department of Education will delay finalizing the end of the 220-20 deferment formula until a point where the change cannot be implemented until July 1, 2009 the same time the new Income-Based Repayment provision starts. This delay in finalizing the end of the 220-20 deferment formula will bridge the gap for medical students.
In sum, a medical resident or medical professional could stand to benefit in these ways from the College Cost Reduction and Access Act:
1. Having 3 years of loan deferment (if income is under 150% of poverty);
2. If they participate in the Income-Based Repayment plan
I hope this information addresses your concerns fully. Again, thank you for contacting me.
Sincerely,
Lisa Murkowski
United States Senator
United States Senate
Lisa Murkowski
Alaska
Thank you for contacting me to express your concern about a provision in the College Cost Reduction and Access Act that recently was signed into law (Public Law 110-84) which eliminated the economic hardship loan repayment provision for medical students. I appreciate the opportunity to respond to your concerns.
As you know, prior to the enactment of the College Cost Reduction and Access Act, borrowers were eligible for an economic hardship deferment of their federal student loan payments if their income was below 100 percent of poverty for a family of two, or if their income was below 220 percent of poverty for a family of two and their debt exceeded 20 percent of their income. This provision was known as the 220-20 deferment formula. Some medical residents took advantage of the 220-20 deferment formula to defer their loans while in residency.
The College Cost Reduction and Access Act changed the definition of economic hardship to allow individuals to be eligible for deferment if their income is below 150 percent of poverty, based on family size. The Act also includes an Income-Based Repayment plan, under which repayment is limited to 15 percent of the borrowers discretionary income. The Act also provides loan forgiveness for Direct Loan borrowers (or those who consolidate their loans under the Direct Loan Program) who work in a public service or non-profit job, such as the Indian Health Service or a public clinic, for ten years.
Given the high cost of the 220-20 deferment formula, it was eliminated from the Act in order to help pay for increasing the maximum Pell Grant award and other borrower benefits. Realizing, however, that this could have an unintended negative effect on medical residents and other similarly situated students, the Act allows borrowers repaying under the Income-Based Repayment plan to have three additional years (on top of 3 years of deferment) of interest paid on federal subsidized loans at any time the borrower elects. These additional three years of deferment cover the traditional residency period.
In addition, the U.S. Department of Education will delay finalizing the end of the 220-20 deferment formula until a point where the change cannot be implemented until July 1, 2009 the same time the new Income-Based Repayment provision starts. This delay in finalizing the end of the 220-20 deferment formula will bridge the gap for medical students.
In sum, a medical resident or medical professional could stand to benefit in these ways from the College Cost Reduction and Access Act:
1. Having 3 years of loan deferment (if income is under 150% of poverty);
2. If they participate in the Income-Based Repayment plan
- Having an additional 3 years of interest paid off;
- Having lower monthly payments For example, a medical resident with the average first year stipend of $43,266 would only be required to make monthly payments of $349; and
I hope this information addresses your concerns fully. Again, thank you for contacting me.
Sincerely,
Lisa Murkowski
United States Senator
