Higher Education News

According to a new report by our national federation, U.S. Public Interest Research Group, first year college students starting this fall can expect to save several thousand dollars on their student loans under new interest rate changes beginning on July 1st. The report, Cutting Interest Rates, Lowering Student Debt Updated, finds that average four-year college student starting school in 2008 with subsidized Stafford loans will save about $2,570 over the life of his or her loans.

The interest rate changes are the result of the College Cost Reduction and Access Act of 2007, passed last summer and signed into law by the President in September. Interest rates on subsidized Stafford loans will lower from 6.8% to 6.0% on July 1st, 2008. 

“With more students taking out larger loans to pay for college, the interest rate reductions going into effect this July 1st will save new low- and middle-income borrowers several thousand dollars over the life of their loans,” said Luke Swarthout, U.S. PIRG’s Higher Education Advocate.

Five and a half million students use subsidized Stafford loans class students and families to pay for college. The median family income of a subsidized Stafford loan borrower is $45,000, and 75% of borrowers have family incomes below $67,000. 

The College Cost Reduction and Access Act also included more than two billion dollars a year in additional need-based grant funding, a new Income-Based Repayment program that allows borrowers to repay federal loans as a portion of their income.  The legislation allows borrowers in public service professions to receive loan forgiveness after 10 years if they are consolidated in the Direct Loan program. For more information about the either of these loan programs borrowers should visit www.ibrinfo.org.

On July 1st the Department of Education will also recalculate interest rates for Stafford loans taken out prior to the 2006 school year. These loans, at variable rates, will lower from 7.2% to 4.25%. Students who have not consolidated their variable loans can do so and lock in the lower interest rate after the first of July.