Not as smart as I thought I was

There are a few things I pride myself on. One is that I've done my taxes every year since I turned 16 and that I actually learned how to fill out a tax form in the 4th grade. As an economics major, I like to be able to understand the basics of supply and demand, and since I went to school prior to the obsession with computers (i.e. Excel) I did all of my problem sets by hand. In graduate school, statistics became my pride and joy, just ask me to do some linear programming or queuing analysis and I will smile and wink. But for all of that I still can barely figure out how to get my loans repaid under the College Cost Reduction Act of 2007.

This little gem of legislation passed last year and grudgingly signed by the President wrote off loan debt for people working in public service after 10 years. It also allowed them to pay no more than 15% of their adjusted gross income on loan payments. Sounds great, right? But since it is a government program there are inevitably a million loopholes and forms one needs to fill out to qualify. Let me break down what I've learned so far:

1. Your loans have to be in the Direct Loan program. Most people don't know this, but there are two programs for federally backed student loans. One is $$$ straight from the Feds (Direct Loans) and the other is $$$ from banks the FFEL program. Schools would prefer to use banks, because often they receive kickbacks in exchange for shuttling their students to their preferred lenders. Most of us as undergrads and even graduate students check off whatever lender is listed on the form and don't think twice about it. But as it turns out having loans directly from the Feds has its benefits, for one its the only way to get them paid off by the government if you decide to dedicate yourself to public service.

2. You can consolidate into the Direct Loan program from the FFEL program, but only if you've tried other FFEL options and they weren't up to par. Fortunately, the fact that FFEL doesn't offer the public service payoff is good enough reason for you to reject them.

3. If you consolidate while you're still in the grace period for your loan, you lose your grace period! Luckily I read this right before I submitted my application. Instead of being able to wait 6 months after graduation I would have to start paying in 60 days!

4. Getting married is not a good idea. The amount you pay on your loan increases if you get married, because they add-in the spouse's income. This means you'll probably end up getting a lot less forgiven by the Feds, depending on how much you make and how much you owe in loans.

5. Congress has not figured out what will happen when the government has to make good on its promise to pay off the loans in 10 years. It may turn out you have to pay taxes on the amount that was forgiven, but experts are saying right now they will probably fix this before 2017 and for the most part you'll pay less in taxes than what the govt. forgives.

Now here's the sad part. I was working for a federal budgeting agency (who shall remain nameless) when this piece of legislation came up for a vote. Even in the middle of it all, I still did not understand all the nuances of what the program was about or what it entailed to become a part of it. And now even after reading a breakdown of it by a legal scholar, I'm still barely keeping my head above water. Good news for Sallie Mae, bad news for the rest of us out to change the world one non-profit/government agency at a time.