Redwood Times – “Interest rates on subsidized student loans cut in half”
Jul 7, 2011 -
Congressmen Mike Thompson (D-CA) announced that the interest rate on subsidized student loans was cut to 3.4% on July 1 - the last of four steps to cut this interest rate in half over four years under the 2007 College Cost Reduction and Access Act. Due to these cuts, the typical student borrower who started college in 2008 will have saved $2,570 over the life of their loan. Under this legislation, the interest rate on subsidized student loans has been cut as follows:
o On July 1, 2008, the interest rate was cut from 6.8% to 6.0%;
- On July 1, 2009, the interest rate was cut from 6.0% to 5.6%;
- On July 1, 2010, the interest rate was cut from 5.6% to 4.5%;
- On July 1, 2011, the interest rate was cut from 4.5% to 3.4%.
Also on July 1, new college affordability information became available to young people and their families on the Department of Education website. This information is to help prospective college students and their families shop for the best value - based on their individual circumstances - for a college education. Students and their families will be provided with early estimates of their expected college costs, and allowed to estimate the annual and total cost of a college education at the individual colleges or universities they are interested in. The site also provides information on incentives for attendance that individual colleges and universities may be offering, such as need-based aid.
In addition to cutting interest rates in half and requiring new online college affordability information, Congressman Thompson and his colleagues have taken numerous other steps to make college more affordable, including:
- Increasing the Maximum Pell Grant. Between 2007 and 2010, Congress increased the maximum Pell Grant from $4,050 to $5,550. Currently, there are about 9 million students receiving a Pell Grant to help pay for the costs of college. In California’s First Congressional District alone, over 18,400 students have received more than $68 million in estimated available aid.
- Implementing an Income-Based Repayment Program. Starting on July 1, 2009, Congress established the Income-Based Repayment Program to make student loan payments more manageable for student borrowers. The program guarantees that borrowers will not have to pay more than 15 percent of their discretionary income in loan repayments.
- Establishing Public Service Loan Forgiveness. Congress also established the Public Service Loan Forgiveness Program, which allows graduates who enter into public service careers - as teachers, public defenders, firefighters, nurses, non-profit workers, and more - to be eligible for complete loan forgiveness after 10 years of qualifying public service and loan repayments. The program has been in effect since October 1, 2007.