On July 1st, Interest Rates on Student Loans Dropped
With today’s economy squeezing families and tuition prices continuing to soar, the high cost of college remains a top concern for Americans. However, there is some good news for college students and their families: New financial aid benefits enacted last year are beginning to kick in for this fall.
Thanks to the College Cost Reduction and Access Act, which provides more than $20 billion in federal student aid over the next five years, interest rates on need-based (subsidized) federal student loans dropped 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 of step towards halving these interest rates – over the next few years these rates will continue to decrease until they reach 3.4 percent.
WHO BENEFITS FROM THIS INTEREST RATE CUT?
Low- and middle-income students and families
5.5 million students borrow need-based federal student loans each year. This interest rate cut will save the typical four-year student starting college this fall (with need-based student loan debt) about $2,570 over the life of his or her loan.
- According to the Congressional Research Service, 75 percent of need-based federal student loan borrowers have family incomes below $67,000.
- According to the U.S. Census, in 2006, the overall U.S. median income for a family of four was roughly $65,000.
- Increase the Pell Grant scholarship by $490 (raising the maximum award to $4,731).
- Provide up-front tuition assistance of $4,000 each year for students who commit to teaching high-need subjects in high-need public schools.
State by State Benefits for Students
State by State Benefits for Students After the First Rate Reduction on
July 1, 2008
State | Number of Subsidized Loan Borrowers at 4-Year Institutions (2004-2005) | Average Subsidized Stafford Loan Debt for 4-Year Graduate | Savings for the Average Student Starting School in 2008 over the Life of the Loan |
AK | 5,119 | $12,854 | $2,390 |
AL | 62,996 | $13,572 | $2,530 |
AR | 39,385 | $13,022 | $2,420 |
AZ | 33,049 | $14,801 | $2,750 |
CA | 228,489 | $15,125 | $2,820 |
CO | 45,588 | $13,455 | $2,500 |
CT | 33,567 | $14,263 | $2,660 |
DC | 16,437 | $14,611 | $2,720 |
DE | 9,534 | $13,927 | $2,590 |
FL | 125,475 | $13,663 | $2,540 |
GA | 83,942 | $13,234 | $2,460 |
HI | 8,752 | $14,321 | $2,660 |
IA | 53,285 | $13,944 | $2,590 |
ID | 26,305 | $13,221 | $2,460 |
IL | 128,765 | $14,111 | $2,630 |
IN | 94,267 | $12,967 | $2,410 |
KS | 42,932 | $13,827 | $2,570 |
KY | 46,963 | $13,026 | $2,420 |
LA | 68,261 | $13,077 | $2,430 |
MA | 98,990 | $13,994 | $2,600 |
MD | 48,484 | $14,096 | $2,620 |
ME | 21,210 | $13,173 | $2,450 |
MI | 143,699 | $13,256 | $2,470 |
MN | 67,468 | $13,480 | $2,510 |
MO | 82,921 | $13,305 | $2,480 |
MS | 36,603 | $14,640 | $2,730 |
MT | 16,212 | $12,587 | $2,340 |
NC | 92,244 | $13,332 | $2,480 |
ND | 17,358 | $12,890 | $2,400 |
NE | 28,021 | $13,248 | $2,470 |
NH | 20,317 | $13,853 | $2,580 |
NJ | 61,221 | $14,367 | $2,670 |
NM | 20,899 | $12,792 | $2,380 |
NV | 10,545 | $13,655 | $2,540 |
NY | 243,696 | $14,276 | $2,660 |
OH | 173,312 | $13,495 | $2,510 |
OK | 47,528 | $13,535 | $2,520 |
OR | 40,721 | $14,832 | $2,760 |
PA | 211,832 | $13,866 | $2,580 |
RI | 19,649 | $13,822 | $2,570 |
SC | 48,433 | $14,301 | $2,660 |
SD | 19,727 | $13,122 | $2,440 |
TN | 67,410 | $13,886 | $2,580 |
TX | 205,508 | $14,233 | $2,650 |
UT | 35,000 | $12,988 | $2,420 |
VA | 73,696 | $13,842 | $2,580 |
VT | 13,575 | $13,671 | $2,550 |
WA | 47,631 | $14,594 | $2,720 |
WI | 75,905 | $13,379 | $2,490 |
WV | 35,194 | $12,579 | $2,340 |
WY | 3,904 | $13,836 | $2,580 |
U.S. | 3,301,841 | $13,821 | $2,570 |
Source: U.S. PIRG
State by State Benefits for Students Once the Rate Reduction is Fully Phased In (As of July 1, 2011)
State | Total increase in loan and Pell aid to students and families over 5 years* | Interest rate cut savings PER STUDENT over the life of the loan at 4-year school (once fully phased in) | Total Number of Students Who Receive the Pell Grant |
AK | $25,010,000 | $4,110 | 4,818 |
AL | $540,194,000 | $4,340 | 102,443 |
AR | $308,888,000 | $4,170 | 58,536 |
AZ | $1,198,858,000 | $4,730 | 212,968 |
CA | $3,034,928,000 | $4,830 | 574,226 |
CO | $465,959,000 | $4,310 | 83,566 |
CT | $217,043,000 | $4,560 | 38,698 |
DC | $170,247,000 | $4,680 | 19,664 |
DE | $51,402,000 | $4,460 | 9,217 |
FL | $1,505,013,000 | $4,370 | 300,621 |
GA | $859,007,000 | $4,230 | 179,861 |
HI | $62,348,000 | $4,580 | 11,528 |
IA | $430,355,000 | $4,460 | 78,855 |
ID | $159,419,000 | $4,230 | 30,105 |
IL | $1,212,459,000 | $4,510 | 211,882 |
IN | $707,953,000 | $4,140 | 139,985 |
KS | $282,419,000 | $4,420 | 52,409 |
KY | $433,109,000 | $4,170 | 82,447 |
LA | $479,452,000 | $4,180 | 94,109 |
MA | $522,318,000 | $4,470 | 77,196 |
MD | $370,576,000 | $4,510 | 69,868 |
ME | $105,062,000 | $4,210 | 19,035 |
MI | $921,601,000 | $4,240 | 180,247 |
MN | $482,555,000 | $4,310 | 76,530 |
MO | $596,737,000 | $4,250 | 105,620 |
MS | $400,755,000 | $4,680 | 76,554 |
MT | $95,840,000 | $4,680 | 17,185 |
NC | $770,979,000 | $4,270 | 146,917 |
ND | $78,578,000 | $4,120 | 13,623 |
NE | $158,075,000 | $4,240 | 28,679 |
NH | $85,113,000 | $4,430 | 13,605 |
NJ | $549,393,000 | $4,600 | 103,953 |
NM | $201,274,000 | $4,090 | 42,096 |
NV | $84,107,000 | $4,370 | 16,876 |
NY | $2,217,665,000 | $4,570 | 378,883 |
OH | $1,102,568,000 | $4,320 | 204,024 |
OK | $401,136,000 | $4,330 | 77,576 |
OR | $351,223,000 | $4,740 | 62,368 |
PA | $1,177,961,000 | $4,440 | 186,323 |
RI | $127,454,000 | $4,420 | 21,590 |
SC | $395,164,000 | $4,580 | 77,145 |
SD | $92,482,000 | $4,200 | 16,725 |
TN | $549,634,000 | $4,440 | 104,012 |
TX | $2,175,219,000 | $4,550 | 427,159 |
UT | $290,591,000 | $4,160 | 60,848 |
VA | $544,536,000 | $4,430 | 98,486 |
VT | $60,884,000 | $4,370 | 8,584 |
WA | $442,190,000 | $4,670 | 85,236 |
WI | $384,752,000 | $4,280 | 67,945 |
WV | $210,298,000 | $4,020 | 37,297 |
WY | $50,318,000 | $4,420 | 8,544 |
*Estimates of student loan reform and additional eligibility for Pell Grant aid based on estimates of current state allocation. Estimates include additional increases in discretionary funding for the Pell Grant scholarship.