Great Student Loan News
In early September Congress passed a bill called the College Cost Reduction and Access Act that is great news for anyone with student loans. The President still hasn’t signed the bill yet signed the bill just yesterday.
The law has some good provisions and some downright awesome ones. Here’s a quick run-down.
Interest rate cut. The law immediately reduces the interest rates on new federally subsidized Stafford loans (also called Direct Loans). Note: this does not apply to loans in repayment right now, only newly issued loans. Right now the rate is 6.8%. The rate drops to 6% right away and continues to decrease until it hits 3.4% is 2011. However, if Congress doesn’t act before 2012, the rate goes right back to 6.8%, so load up on that debt now.
Low payment option. The law establishes a ceiling on how much your student loan repayment can be each month. Using a formula, the most you will pay per month is 15% of your discretionary income.
Loan forgiveness for public service. Currently, some teachers qualify to have student loans forgiven. With the new law, many more professions will get similar treatment. Police, librarians, firemen, military members, and government employees in general all get added to the list. Significantly, so do prosecutors and public defenders with their fancy pants law degrees and huge student loan balances.
Loan balance forgiveness for all. For everybody else, there’s still hope. After making student loan payments for 25 years (yeah, I know, that’s a helluva long time), any remaining balance is forgiven. This provision applies to anyone with federal loans.
Higher Pell grants. This is probably the least-significant provision. Pell grants will increase yearly from their current pathetic level of $4,310 to a whopping high of $5,400 in 2012. Never mind the fact that you can’t even think about a Pell grant if you’re in the middle class.
Naturally, private lenders say this law will make it harder to go to college, since they claims some of them will get out of the business. I find that extremely hard to believe; don’t believe stories to that effect.
September 28th, 2007 at 7:09 am
Thanks for posting about this. The 25 year one is especially nice. We plan to pay them off before then, but if we can’t it’s nice to know that they’ll still go away.