Student Loan Forgiveness

I read in your column that under a new federal law, college students in teacher-prep programs are eligible for annual grants of $4,000 to help cover college costs. My daughter is studying to be a teacher, so obviously I'm very interested in this grant. How can she apply?

Fill out the electronic version of the Free Application for Federal Student Aid (FAFSA).

Full details for applying for a so-called TEACH grant have not been worked out by the U.S. Department of Education. But this year's electronic FAFSA includes a TEACH screening question. Forms with a positive response will be flagged so that colleges know of an applicant's interest in the grants.

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Unfortunately, the new law was passed too late to include this question on the paper FAFSA. So applicants filing hard-copy forms need to contact individual colleges. For now, says the Department of Education, the best guidance is to file an electronic FAFSA and follow up with the school.

Note that in order to be eligible for annual grants, students must commit to teach for four years after graduation. If they decide later not to teach, the grants must be repaid.

And as a P.S. to all parents of college-bound students, I'd like to add my own reminder to fill out the FAFSA even if your kids aren't in teacher-prep programs. You need to submit this form every year in order to be eligible for all types of financial aid, including Stafford student loans.

Forgiveness for service

I'm a police officer in Illinois. I currently owe about $40,000 in college loans. Do you know any way I can get the government to pay at least part of my loans?

You may be in luck. The same federal law that authorizes teacher education grants (see the preceding question) also includes a provision that forgives the balance on federal Stafford loans for people who work full-time for ten years in qualifying public-service jobs. That includes law enforcement.

To be eligible, you must have made 120 monthly loan payments. And only payments made on or after October 1, 2007, as part of the federal Direct Loan program, count.

If you aren't already in the Direct Loan program, starting on July 1, 2008, you can apply for a federal direct consolidation loan (go to www.loanconsolidation.ed.gov, or call the Department of Education at 800-557-7392). This will make you eligible for loan forgiveness.

Note that the program is targeted to borrowers with high debt and low income; borrowers with low debt or high income will not benefit as much, says Finaid.org (see www.finaid.org/loans/publicservice.phtml for more information).

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.