Dearborn, MI - Today, new benefits will take effect that will make student loans more affordable to repay 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.  Congressman John D. Dingell (D-MI15) discussed the program with University of Michigan students at the Michigan Union this afternoon.

“We have seen firsthand here in Michigan that individuals today cannot afford to NOT go to college,” Dingell told the students.  “When I was a boy, you could get a good job out of grade school. Then you could get a good job out of high school. Now you can get a good job out of college — maybe.  The days of making a sound living working for the Big Three are behind us.”

The benefits are all kicking in as part of the College Cost Reduction and Access Act, which Congressman Dingell helped enact in 2007 under the new Democratic Congress. 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.  Mr. Dingell himself paid for his college education with the help of the GI Bill after serving in the Army during World War II.

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).

“I want you to know that I am working with my colleagues to make college more affordable for any and all students who want a higher education,” Dingell said during the event.  “I was pleased to support these new benefits, and you can rest assured that I will continue to support legislation that lessen the debt for our college students.”

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 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 2009-2010 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 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. This program can be used in conjunction with Income-Based Repayment.

Recent data shows that Americans’ interest in public service is surging. This year’s applications for programs like Teach for America and AmeriCorps have skyrocketed by 42 percent and 200 percent, respectively.

For more information on these benefits, click here.

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