College Cost Reduction and Access Act Kicks In
As a result of legislation passed by the Democratic Congress, interest rates on need-based federal student loans will be cut in half over the next few years, saving the average borrower $2,570 over the life of the loan. Starting on July 1st, the interest rate for need-based, or subsidized, federal loans dropped from 6.8 percent to 6.0 percent — the first step in halving interest rates until they reach 3.4 percent.
This legislation also:
Increases Pell Grants by $490, raising the maximum award to $4,731
Provides up-front tuition assistance of $4,000 each year for students who commit to teaching high-need subjects in high-need public schools
Watch a video from the Education and Labor Committee:
Chairmen Miller & Kennedy: Beginning Tomorrow, Millions of Students Will Have Access to Cheaper Interest Rates on College Loans
Students Begin Receiving New Financial Aid Benefits Enacted By the Democratic Congress
WASHINGTON, D.C. — As a result of an historic student aid law enacted by the Democratic Congress last year, interest rates on need-based federal student loans will decrease tomorrow, July 1, from 6.8 percent to 6.0 percent, the first of four steps to cut these interest rates in half over four years. U.S. Rep. George Miller (D-CA), and U.S. Senator Edward M. Kennedy (D-MA), the chairmen of the House and Senate education committees and the authors of the law, said today that the interest rate reduction — one of several new financial aid benefits the law will provide for students this fall — will make these loans more affordable for millions of student borrowers this fall.
“Tomorrow is a pivotal day for the millions of low- and middle-income students who depend on need-based loans to help pay for college,” said Miller. “The Democratic Congress believes that making college more affordable is one of the most important things we can do to invest in our nation's future and build a stronger middle class. This first interest rate cut is just the beginning of our efforts to remove the many financial barriers that prevent far too many qualified students from being able to pursue a college degree.”
“This much-needed help for college students and their families couldn't come soon enough. Senator Kennedy believes strongly that we cannot allow today's slumping economy to rob young Americans of their chance to achieve the American dream,” said Melissa Wagoner, a spokeswoman for Kennedy.
Under the College Cost Reduction and Access Act, which was signed into law last September, the interest rates on need-based (subsidized) federal student loans will continue to decrease over the next four years, until they reach 3.4 percent.
This initial interest rate cut alone will save the typical student borrower beginning college in 2008 about $2,570 over the life of his or her loan. Need-based federal student loans are primarily awarded to low- and middle-income students; according to the Congressional Research Service, 75 percent of need-based federal student loan borrowers have family incomes below $67,000. About 5.5 million students borrow these loans each year to help pay for college.
In addition, the law also provides the following benefits to students for the 2008-2009 school year:
Increases the Pell Grant scholarship by $490 (raising the maximum award to $4,731 for the 2008-2009 year). This is the first of five annual steps towards boosting the Pell Grant scholarship by a total of $1,090 by 2012. About 5.5 million low-income students receive Pell Grants each year.
Provides up-front tuition assistance to college students who commit to teaching high need subject areas in high-need public schools after graduation. Undergraduate students will be eligible to receive $4,000 in grants each year, for a maximum of $16,000. Graduate students will also be eligible for $4,000 a year in up-front assistance, for a maximum of $8,000.
Provides loan forgiveness to college graduates who enter public service professions after ten years of public service and federal student loan repayments. Eligible public servants include firefighters, public defenders and prosecutors, first responders, law enforcement officers, early childhood educators and men and women serving in the military, and more.
Altogether, the College Cost Reduction and Access Act will boost college financial aid by $20 billion over the next five years — and at no new cost to U.S. taxpayers. For more information on this law, and Democrats' ongoing efforts to make college more affordable, click here.
The House and Senate are currently in the process of finalizing legislation that would address rising college tuition prices, put a stop to conflicts of interest in the student loan programs, and strengthen and reform our nation's higher education programs to ensure that they operate in the best interests of students and families.