Loan Forgiveness and Tax Deduction Benefits for College Admission Counseling Professionals

Transcription

1 NACAC s Policy to Practice Brief A POLICY SERIES OF THE NATIONAL ASSOCIATION FOR COLLEGE ADMISSION COUNSELING and Tax Deduction Benefits for College Admission Counseling Professionals NACAC Mission states: ISSUE Inside This Issue: 2 Federal Tax Deduction Helpful Links The National Association for College Admission Counseling will support and advance the work of counseling and enrollment professionals as they help all students realize their full educational potential. 5 Bibliography Policy highlights: School counselors in low-income communities are eligible for $2,000 forgiveness annually for a maximum of $10,000 on Federal Family Education Loans and Direct Loans. School counselors and college admission counselors are eligible for forgiveness on the remaining balance on Direct Loans after 120 monthly payments. School counselors can deduct up to $250 of unreimbursed expenses for books, supplies, equipment, and materials. Implications for practice: The policy goal for loan forgiveness is to entice more people to serve as school counselors in high-need schools. The U.S. Department of Education will establish federal regulations on loan forgiveness for service in areas of national need when negotiated rulemaking for the Higher Education Opportunity Act is complete. The National Association for College Admission Counseling (NACAC) is an organization of more than 11,000 professionals from around the world dedicated to serving students as they make choices about pursuing postsecondary education. NACAC advocates for school counselors and promotes the support of necessary resources that enable students to be provided with the best possible assistance to students throughout the nation. The U.S. Secretary of Education will provide applications for loan forgiveness for non-profit and public service employees after 10 years of on-time repayment. School counselors will be able to make tax-deductible purchases for materials when school budget resources are limited.

2 FEATURE Background In recent years, improving college access has gained increased national attention as tuition costs rise and student aid packages do not keep pace. As the awareness of these financial challenges associated with college access have increased, so also have the social challenges including limited access to college counseling. College access research indicates that counselors are an essential part of positively effecting student aspirations and achievement (McDonough, 2006). Qualitative and quantitative data about counseling have served as the foundation for advocacy efforts of associations like NACAC. Higher Education Opportunity Act and College Cost Reduction and Access Act School counselors are eligible for loan forgiveness for service in areas of national need in the 2008 reauthorization of the Higher Education Act enacted August 1, 2008 (Public Law ); and school counselors and college admission counselors are eligible for loan forgiveness for public service employees and income-based repayment in the College Cost Reduction and Access Act (Public Law 110-8) approved September 7, The following is a discussion of loan forgiveness eligibility requirements and provisions. The combination of research and advocacy has led to increased awareness among lawmakers of the importance of school counselors in improving college access and the challenge of hiring and retaining effective school counselors. In recent years, NACAC advocated for school counselor loan forgiveness by providing policy recommendations to federal legislators. Loan forgiveness can prove to be incentive for counselors to enter and continue employment in schools, as the average student loan debt for the class of 2007 was $20,098 (The Project on Student Debt, October 2008). Advocacy efforts resulted in loan forgiveness text in the final legislation of two major education bills in as many years. As the awareness of these financial challenges associated with college access have increased, so also have the social challenges including limited access to college counseling. College access research indicates that counselors are an essential part of positively effecting student aspirations and achievement. Federal Family Education Loan and Direct Loan forgiveness under the Higher Education Opportunity Act The Higher Education Opportunity Act authorized appropriations for five years of loan forgiveness for service in areas of national need. School counselors are eligible for loan forgiveness if they are employed full-time as a school counselor in a school that qualifies. Under the legislation: School counselor is defined as an individual who has documented competence in counseling children and adolescents in a school setting and who: a) is licensed by the State or certified by an independent professional regulatory authority, b) in the absence of such State licensure or certification, possesses national certification in school counseling or a specialty of counseling granted by an independent professional organization, or c) holds a minimum of a master s degree in school counseling from a program accredited by the Council for Accreditation of Counseling and Related Educational Programs or the equivalent. A school that qualifies is one in which 30 percent of the enrollment lives in measures of poverty, as measured by any combination of the following; that is, children who are: a) counted in the most recent census data b) eligible for free and reduced priced lunches c) in families receiving assistance under the State program funded under part A of title IV of the Social Security Act d) eligible to receive medical assistance under the Medicaid program : POLICY TO PRACTICE BRIEF: LOAN FORGIVENESS

3 Loans eligible for forgiveness are part of the Federal Family Education Loan (FFEL) and Direct Loan (DL) programs and include the Stafford Loans, Unsubsidized Stafford Loans, the PLUS loans, and consolidated loans. After completing each school, academic, or calendar year after August 1, 2008, school counselors are eligible for forgiveness of a maximum of $2,000. Loan forgiveness will continue up to five years and for a maximum of $10,000 in total loan forgiveness. Once federal regulations are established, the 111th Congress will appropriate funding for the loan forgiveness provision in the fiscal year 2010 budget. The appropriation will determine availability, as forgiveness will be granted on a first-come, first-served basis while appropriation funding lasts. NACAC will immediately disseminate the details of the forgiveness process, eligible schools, and appropriation totals for each fiscal year once they are available. Federal Direct Loan (DL) forgiveness and Income- Based Repayment (IBR) under the College Cost Reduction and Access Act The College Cost Reduction and Access Act authorized loan forgiveness for public service employees, including professionals in public education and higher education. School counselors and college admission counselors are eligible for the forgiveness of Federal Direct Loans if they have made 120 consecutive monthly payments (10 years) on the loan after October 1, Counselors must have worked in a public service job for each of the 10 years, at the time of application for forgiveness, and at the time the balance is forgiven. Payments made prior to October 1, 2007 are not considered toward forgiveness eligibility (U.S. Department of Education, 2009b). Under federal regulations from the U.S. Department of Education, public service employees include public and private, non-profit elementary, secondary, and postsecondary schools. To be eligible, employees must: Work full-time for an annual average of at least 30 hours per week or at least eight months for an average of 30 hours per week. Not be in default on the loans for which they are applying for forgiveness. Loans Eligible for Forgiveness (Stafford, Unsubsidized Stafford, Plus, and consolidated loans) Under HEOA: Eligible loans are part of the FFEL and DL programs. School counselors are eligible for forgiveness of a maximum of $2,000 for 5 years. Under CCRAA: Eligible loans are part of the DL program. Remaining principal and accrued interest is forgiven after 120 payments. Eligible loans are Federal Direct Stafford Loans, Federal Direct Unsubsidized Stafford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans. FFEL borrowers are able to consolidate into DL to become eligible for forgiveness, but only payments made in DL will be considered toward forgiveness eligibility (National Association of Student Financial Aid Administrators, 2008). Forgiveness includes remaining principal and accrued interest on the loan. After the 120 monthly payments, school counselors may request the loan forgiveness application from the Department of Education. Once an application is received, the Department of Education will review and determine the completion of eligibility requirements. Loan forgiveness application information will be available on the U.S. Department of Education s Direct Loan Servicing Web site at (National Alliance of Pupil Services Organizations, 2007; U.S. Department of Education, 2009a). What type of loan do I have? To determine if loans borrowed are those eligible for forgiveness, visit the U.S. Department of Education s National Student Loan Data System for Students at (U.S. Department of Education, 2009c). This secure site requires a social security number (SSN) and personal identification number (PIN). The database enables borrowers to view information about loans such as outstanding balances, statuses, and disbursements. A glossary of terms is also available to ease the understanding of student loan information. In 2007, NACAC produced a policy brief on student loans that includes a summary of loan programs and definitions. The brief is available on NACAC s Web site ( LegislativeNews/Documents/PolicyBrief_Student%20Loans.pdf). 2009: POLICY TO PRACTICE BRIEF: LOAN FORGIVENESS 3

4 FEATURE Income-Based Repayment Beginning July 1, 2009 NACAC members may be eligible for Income-Based Repayment (IBR). IBR caps monthly federal loan payments at an affordable level based on income and family size, and forgives any debt and interest that remains after 25 years. Public service employees who owe more on federal student loans than they earn in a year can probably benefit from IBR. The lower the income, the lower the monthly payment will be: in some cases, as low as $0. IBR is available for almost all federal loans (Direct Loan and Federal Family Education Loan) made before or after IBR was created for undergraduate or graduate school. For a simple calculator to estimate monthly payments, please visit Additional information about IBR can be found on the Federal Student Aid fact sheet available on the Department of Education s Web site ( aid.ed.gov/students/publications/factsheets/factsheet_income BasedRepayment.pdf). Federal Tax Deduction School counselors are eligible to deduct up to $250 of unreimbursed expenses from federal income tax Form 100 from the Internal Revenue Service. Eligible counselors must work at least 900 hours per school year in an elementary or secondary school. Expenses incurred during the tax year for books, supplies, computer equipment (software and services), other equipment, and supplementary materials are included in this deduction. In the past, these items were only deductible as a miscellaneous itemized deduction. This new $250 deduction does not require itemization and can be claimed under Adjusted Gross Income in line 23 of Form 100 or line 16 of Form 100A (U.S. Department of the Treasury, 2009). For additional information about educator expense deductions, visit the Internal Revenue Service at Helpful Links Higher Education Opportunity Act ( National Student Loan Data System ( College Cost Reduction and Access Act ( cgi?dbname=110_cong_bills&docid=f:h2669enr.txt.pdf) ( Federal Student Aid ( ( Direct Loan Servicing ( Income-Based Repayment ( ( english/ibrplan.jsp) Internal Revenue Service ( NACAC Policy Brief: Student Loans ( Documents/PolicyBrief_Student%20Loans.pdf) 2009: POLICY TO PRACTICE BRIEF: LOAN FORGIVENESS

5 Bibliography McDonough, P.M. (2006). Counseling and College Counseling in America. Alexandria, VA. National Association for College Admission Counseling. National Alliance of Pupil Services Organizations. (2007). for Specialized Instructional Support Personnel. Retrieved from National Association for College Admission Counseling. (2007). NACAC Policy Brief: Student Loans. Retrieved from National Association of Student Financial Aid Administrators. (2008). College Cost Reduction and Access Timeline. Retrieved from The Project on Student Debt. (October 2008). Student Debt and the Class of Retrieved from U.S. Department of Education. (1965). Elementary and Secondary Education Act. Section 521(e). Retrieved from U.S. Department of Education. (2001). No Child Left Behind Act of Section 1113(a)(5). Retrieved from U.S. Department of Education. (2007). College Cost Reduction and Access Act. Section 01. Retrieved from U.S. Department of Education. (2008). Higher Education Opportunity Act. Section 30.Retrieved from U.S. Department of Education. (2009a). Direct Loan Servicing. Retrieved from U.S. Department of Education. (2009b). Federal Student Aid: for Public Service Employees. Retrieved from U.S. Department of Education. (2009c). National Student Loan Data System. Retrieved from U.S. Department of the Treasury. (2009). Topic 58 Educator Expense Deduction. Retrieved from : POLICY TO PRACTICE BRIEF: LOAN FORGIVENESS 5