Washington, D.C. -  U.S. Rep. Timothy V. Johnson today praised House passage of the College Student Relief Act of 2007, calling the bill a critical step on the road to college affordability.

   “Few people can go to college without loans these days and some of the loans are staggering for people just starting their careers,” Rep. Johnson said. “This bill will save borrowers thousands of dollars. That’s especially important in my district where we have three major public universities, plus many community colleges and private universities.”

   The legislation approved Wednesday night amends the Higher Education Act of 1965 to phase in cuts in the interest rate charged undergraduate student borrowers over a five-year period for subsidized loans known as Stafford Loans, which are awarded based on financial need. The loans are subsidized in that the government covers the interest while borrowers are in school.

   The schedule for reduction from the current 6.8 percent fixed rate is as follows:

   July 2007 - 6.12%

   July 2008 – 5.44%

   July 2009 – 4.76%

   July 2010 – 4.08%

   July 2011 – 3.4%

   In January 2012, the rate returns to 6.8%.

   The reductions do not affect loans already taken out.

   The cost for the bill is offset by reductions in payments to lenders and increased fees from lenders; these are decreasing the subsidies that private lenders will receive. 

   The legislation will affect approximately 5.5 million Americans and it is estimated that the average subsidized Stafford loan borrower from a four-year college would save over $4,000.

   Rep. Johnson said that while he is supportive in the cuts to loan rates, more action is needed to address escalating college costs, particularly in public universities.

   “In the past few years we’ve made some headway in putting Pell grant funding on solid ground and in fact increasing Pell grant funding by two-thirds over the past decade,” Rep. Johnson said. “We’ve improved incentives for students, incentives for saving, incentives for shopping  around for loans. Affordability and accessibility are goals we can continue to work toward, and this is a good step forward in that respect.”

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