The interest rate on federal student loans was reduced from 6.8 to 6 percent on July 1. The rate cut is the first of four scheduled cuts that will make need-based federal student loans more affordable for students and their families.
The reductions are part of the College Cost Reduction and Access Act, legislation passed last year by the U.S. Congress.
“This financial assistance is particularly important as more families are struggling to make ends meet in these difficult economic times,” U.S. Rep. Lois Capps (D-Santa Barbara) said in a press release. “This law will help make college more accessible for our students and their families without burdening them with crippling debt.”
According to the release, approximately 228,000 students in California take out need-based loans each year, and the average graduate of a four-year public school accumulates more than $15,000 in student loans.
By cutting the interest rates from 6.8 percent to 6 percent, the average student starting a four-year college in California will save approximately $2,820 over the course of their loan.
Along with cutting the interest rates on need-based student loans, the legislation increased the maximum value of the federal Pell Grant scholarship by $1,090 per year.
The law also helps fight student debt by guaranteeing that student borrowers never have to spend more than 15 percent of their yearly discretionary income on loan repayments, and by allowing borrowers in economic hardship to have their loans forgiven after 25 years.
Lastly, the law encourages students to pursue careers in public service by offering tuition assistance of $4,000 per year for excelling undergraduate students who agree to teach in the nation’s high-need public schools, and provides up to $5,000 in loan forgiveness for college graduates who go into public service professions.
School Scene is compiled by Staff Writer Amy Asman. Information should be sent to the Sun via fax, e-mail, or mail.
This article appears in Jul 10-17, 2008.
