Press Releases

Washington, D.C. – Tomorrow, July 1st, new benefits will take effect that will make the repayment of student loans more affordable by allowing borrowers to cap monthly loan payments at a reasonable percentage of the borrowers’ 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.

"An affordable college education is essential to helping some students fulfill the American dream," said Payne. "This new program gives students the assistance they need to get a quality college education that will propel them to future success. It is a remarkable opportunity for our young people."

The benefits are part of the College Cost Reduction and Access Act, which Congressman Payne helped to 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.

Beginning July 1st, 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 tomorrow include:

• Cheaper interest rates on need-based (subsidized) federal student loans. On July 1st, 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, approximately 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. An estimated 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 this 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, men and women serving in the military, and more. This program can be used in conjunction with Income-Based Repayment.

For more information on these benefits, click here.

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