Savings on Federal College Loans for Millions of Students, Starting Today

Starting today, July 1, interest rates on need-based federal student loans will drop, making these loans cheaper for millions of college students. With our economy putting enormous financial strains on Americans and tuition prices continuing to soar, these new financial aid benefits could not be coming at a more critical time for college students. As families continue to explore their financial aid options for the coming school year, it is crucial to make sure that students are fully aware that significant financial relief, whether in the form of cheaper student loans, increased grant aid, or up-front tuition assistance, is available to help them pay for college this fall.

Under the College Cost Reduction and Access Act, which was signed into law last September, interest rates on need-based (subsidized) federal student loans will drop from 6.8 percent to 6.0 percent on July 1st -- making these loans more affordable for millions of low- and middle-income students. This is the first step toward halving these interest rates -- over the next few years these rates will continue to decrease until they reach 3.4 percent.

This interest rate cut 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.

(Crossposted at Campus Progress)

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Comments

[Rep. George Miller - Huffpost Blogger]

To respond to some of the comments...

This particular law only affects interest rates on loans taken out after July 1, 2008, and doesn't change the way loans are allocated.

I appreciate everyone's comments and will keep them in mind as Congress continues its work to make college more affordable.

[Rep. George Miller - Huffpost Blogger]

To respond to some of the comments...

This particular law only affects interest rates on loans taken out after July 1, 2008, and doesn't change the way loans are allocated.

I appreciate everyone's comments and will keep them in mind as Congress continue its work to make college more affordable.

[mom2sons]

Good start. Now they need to do restructuring of interest rates for prior years. Rip off at 8.5%, can't afford to pay it like that, so send what I can.

[summerteeth]

is there any help at all for college students with loans taken from prior years? i have the equivalent of mortgage payments on my loan and as a result, cannot afford a mortgage!

[bullypulpit]

Thank you, Congressman Miller! Good news with good timing since my son is college bound next year. Proud to have you representing our district, sir!

[Sportswoman]

To answer the question regarding community college asistance, the answer is yes, it will wipe out tuition and books. However, the one sorely neded reform is in the restructuring of family income qualifications for loan amounts, which is 20 years behind the times.

[gonavy]

Are federal loans still unavailable for Community College students? While I think it's great that there will be more money for grants, the way they determine who is elegible for the grants needs to be updated.

[jfb151]

This is a great, great moment for public service workers such as myself (teacher.) We should all be aware that George W. Bush, in his infinite wisdom, is attempting to eliminate loan forgiveness for current loan holders. So, all of those currently working in the public service sector would be ineligible if his budget is passed.

[MsLiz]

Thanks for the help. I wish my kid would be a teacher.

Hey, I was a public defender after law school, can I get reimbursed for those student loans I paid off?