Interest Rate on Federal Student Loans Drops Today
First Phase of College Cost Reduction and Access Act Kicks In
Washington, DC – – Taking out a loan for college is more affordable starting today, thanks to the College Cost Reduction and Access Act of 2007 passed by Congress last year. The single largest increase in college aid since the GI bill, the legislation directs interest rates on subsidized federal Stafford Loans for undergraduates to drop to 6% from 6.8% today, with the goal of cutting the rate in half by 2011.
“This rate cut will be a tremendous benefit to college students, who are graduating college with more debt than ever,” Rep. Kind said. “Making college more affordable was a major priority of the new Democratic Congress, and with the economic slowdown we’ve been experiencing, this investment couldn’t have kicked-in at a better time. We must ensure our students continue to seek higher education, which acts as a down payment on not only their future prosperity, but also that of our economy.”
This interest rate cut will benefit the 5.5 million students who borrow need-based federal student loans each year, saving the typical four-year student in Wisconsin starting college this fall (with need-based student loan debt) about $2,490 over the life of his or her loan. Rates on subsidized federal Stafford Loans will continue to drop over the next few years: to 5.6% on July 1, 2009, to 4.5% on July 1, 2010, and to 3.4% on July 1, 2011. Federal loans will stay fixed at the same low rate over the life of the loan.
In addition to the interest rate cuts, the College Cost Reduction and Access Act will:
- Increase the purchasing power of the Pell Grant Scholarship by $490 (increasing the maximum award to $4,731) in the 2008-2009 academic year.
- Ensure a highly qualified teacher in every classroom by providing up-front tuition assistance of $4,000 a year for students who commit to teaching high-need subjects or in high-need public schools.
- Encourage and reward public service by providing loan forgiveness after 10 years for public servants, including military service members, first responders, firefighters, nurses, public defenders, early childhood educators, librarians, and others.
Western Wisconsin boasts five four-year public universities, one four-year private college, and numerous vocational college campuses.