Six things to know about the College Cost Reduction and Access Act of 2007:
1. Pell Grants will increase from the current $4,310 maximum award to $4,800 for academic years 2008-09 and 2009-10, $5,000 for academic years 2010-11 and 2011-12 and $5,400 for academic year 2012-13.
2. Interest Rates on Subsidized Federal Loans will be reduced in stages over the next four years. The current interest rate is set at 6.8 percent. The legislation reduces the rate to 6 percent in July 2008, 5.6 percent in July 2009, 4.5 percent in July 2010 and 3.4 percent in July 2011.
3. An Income-Based Repayment program protects borrowers from excessive repayment burdens. The IBR caps monthly loan payments at 15 percent of discretionary income for all federal loans made to graduate and undergraduate students. It also increases the amount of income that is sheltered from the financial aid process by raising the income protection allowance for working students and cancels remaining balances after 25 years of income-based repayment.
4. Borrowers who spend at least 10 years in public service professions and make income-based payments through the direct loan program are eligible to have their remaining balances forgiven. Eligible professions include emergency management, law enforcement, public health, government and 501(c)(3) organizations such as colleges and universities.
5. More than $500 million will be provided toward historically black colleges and universities, Hispanic serving institutions and other colleges that serve minority students.
6. The Department of Education is required to develop a “loan auction pilot program.” The program is designed to auction off the right to make PLUS loans to the two lenders in each state with the most competitive bids. This proposal reflects a desire to have market forces determine the level of federal subsidy paid to lenders, but concerns remain about possible unintended consequences for parent borrowers.
Source:
American Council on Education
http://www.acenet.edu
