Washington, D.C. - Today, July 1, new benefits will take effect that make student loans more affordable by allowing borrowers to cap their monthly loan payments at a reasonable percentage of their income. Certain eligible low- and moderate-income students taking out new federal student loans will also see lower interest rates and higher Pell Grant scholarships. This new program gives our students the help they need to get a quality college education that will propel them to future success and allow them to fulfill the American Dream.
The benefits are all kicking in as part of the College Cost Reduction and Access Act, which Rep. Berman helped enact in 2007. The legislation invested $20 billion in college aid for families, at no additional cost to taxpayers – the single largest investment to help Americans pay for college since the GI Bill.
Beginning July 1, for the first time, borrowers will be able to participate in a new Income-Based Repayment program that caps their monthly loan payments at just 15 percent of their discretionary income, defined as earnings above 150 percent of the poverty level. Any current or future borrower whose loan payments exceed 15 percent of their discretionary income will be eligible. After 25 years in the program, borrowers’ remaining loan balances, including interest, will be completely forgiven.
Other benefits that go into effect today include:
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Cheaper interest rates on need-based (subsidized) federal student loans. On July 1, interest rates on Stafford, GradPLUS, and federal consolidation loans will continue to drop, from 6 percent to 5.6 percent. This is the second of four annual cuts in this interest rate, which will continue to drop until it reaches 3.4 percent in 2011. Nationwide, about 5.5 million students take out subsidized student loans each year.
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Higher Pell Grant scholarships for low- and moderate-income students. Due to funding boosts provided by both the College Cost Reduction and Access Act and the American Recovery and Reinvestment Act, the maximum Pell Grant scholarship for the 2009-2010 school year will be $5,350 – more than $600 above last year’s award. About 6 million students receive this scholarship each year. including over 774,000 students in California.
In addition, Americans will continue to be able to enter into a new public service loan forgiveness created under the law. College graduates – or workers of any age – who enter public service professions will have their federal college loans completely forgiven after ten consecutive years of service and loan repayments. Eligible public servants include firefighters, public defenders and prosecutors, first responders, law enforcement officers, early childhood educators, men and women serving in the military, and more. This program can be used in conjunction with Income-Based Repayment.
Recent data shows that Americans’ interest in public service is surging. Applications for Americorps programs have skyrocketed by 200 percent, including a 42 percent increase in applicants for the Teach For America program.
For more information on benefits provided by the College Cost Reducation and Access Act, click
here.
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