WASHINGTON, D.C. — U.S. Rep. John Barrow (D-Savannah) reminds students and families in Georgia’s 12th District that new student loan benefits took effect July 1.
The benefits will make it more affordable to repay student loans 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.
“If we want our kids to succeed, a college education can’t be a luxury,” said Barrow. “This program will help make a quality college education affordable to more students who previously couldn’t afford to pay the skyrocketing costs. It’s not a silver bullet, but it sure is a good start.”
These benefits are kicking in as part of the College Cost Reduction and Access Act, which Barrow 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 15 percent of what a borrower earns above 150 percent of the poverty level for their family size). 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:
• Cheaper interest rates on need-based (subsidized) federal student loans. On July 1, interest rates on these loans will continue to drop, from 6 percent to 5.6 percent. This is the second of four annual cuts in this interest rate; it 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.
• 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 2009-10 school year will be $5,350 — more than $600 above last year’s award. About 6 million students receive this scholarship each year.
In addition, Americans will continue to be able to enter into a new public service loan forgiveness program 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 and men and women serving in the military, and more.