Program ‘Forgives’ Student Loans for Child-Care Workers

Child-care workers with outstanding student loans may be eligible for a new loan-forgiveness program that targets workers in low-income areas. But they’ll have to act fast.

The deadline to apply for the loan-cancellation “demonstration project,” launched last month by the Department of Education, is Sept. 17. Only $1 million has been set aside for loan forgiveness this year--an amount that probably will meet only a fraction of the demand--and the money will be awarded on a first-come, first-served basis, an Education Department spokeswoman said.

If the program is continued, preference for future loan cancellations will be given to this year’s eligible applicants who did not receive funds.

A similar program has been launched for teachers who work in certain low-income areas, said Bob Murray, a spokesman for student loan guarantor USA Funds in Indianapolis, but there is no deadline for applications in that program.

Both programs were created in a 1998 student aid law. However, regulators did not issue rules governing the program until July 27, when the program requirements were posted in the Federal Register.

How do the programs work?

Child-Care Provider Program

The program will pay up to 100% of the outstanding balance of qualified borrowers’ education loans through the Federal Direct Loan Program or the Federal Family Education Loan Program. (These are commonly referred to as Stafford loans.)

The amount will be based on how long the applicant has been working in a job that qualifies him or her for the program. The program will pay off 20% of loan balances for those who have completed two consecutive years of work; 40% for three years; 70% for four years; and 100% for five consecutive years.

Who qualifies:

To qualify, applicants must meet all of the following criteria.

* They took out student loans after Oct. 7, 1998. Those who had outstanding student loan balances before that date are ineligible.

* They have an associate or bachelor’s degree in early-childhood education.

* They must work in day-care facilities that serve low-income communities. Qualifying day-care facilities can include homes, schools and other day-care centers that provide child-care services and meet applicable state or local licensing, certification, approval or registration requirements.

Details:

A low-income community is one in which 70% of the individuals and families earn less than 85% of the state’s median household income. Those who don’t know whether their day-care center qualifies can find out at the Department of Education Web site at https://www.ed.gov.

A link to the Education Department’s qualification work sheet can be found at the USA Funds Web site at https://www.usafunds.org by clicking on the prompt for information about loan forgiveness for child-care providers. This site has several links, including one to the application form, which can be printed, filled out and mailed.

There are no income restrictions for applicants.

Questions:

For more information, call the Child Care Loan Forgiveness Program at (888) 562-7002 between 8 a.m. and 4:30 p.m. EDT, Monday through Friday.

Teacher Program

Teachers who have worked for at least five consecutive years in schools serving low-income students may qualify for up to $5,000 in loan forgiveness on their Stafford loans or the outstanding portion of a consolidation loan that was used to repay a qualifying Stafford loan.

Qualification standards:

To qualify, teachers must meet all of the following criteria:

* They got their student loans after Oct. 1, 1998.

* They must have worked as a full-time teacher in a school serving low-income students for at least five years.

* Secondary school teachers must teach a subject that’s relevant to their academic major.

* Elementary school teachers must have “demonstrated knowledge and teaching skills in reading, writing, mathematics and other areas of the elementary school curriculum.” (It’s unclear what will be required of teachers to prove they meet this criteria, which is part of the 1998 law that created this loan-forgiveness program.)

Details:

Qualifying teachers can apply for this program by sending a Teacher Loan Forgiveness Application to their loan holder or loan servicer. Unlike the child-care provider program, there is no deadline for these applications and no limit on the amount available for the program. However, the maximum amount of forgiveness available to each teacher is $5,000.

The teachers program is permanent and does not require annual appropriations by Congress. Not so for the child-care program. If Congress does not approve additional funding, no further loan cancellations will be approved for child-care workers.

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Times staff writer Kathy M. Kristof, author of “Investing 101” (Bloomberg Press, 2000), welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes.com. For past Personal Finance columns visit The Times’ Web site at https://www.latimes.com/perfin.