January 5, 2007

Student Loan Rate Decrease – The Details!

Posted in Legislation Affecting Students, Parent PLUS Loans, Stafford Loans, Student Loan News at 1:19 PM by Joe From Boston

From NCHelp.org’s Daily Briefing newsletter (login may be required to acces the full article):

“Democratic leaders yesterday unveiled some details of their plan to halve student loan interest rates under H.R. 5, The College Student Relief Act of 2007. Under the plan, interest rates on subsidized loans would be reduced from 6.8 to 3.4 percent in five steps, over a five-year period. The interest rate reduction would take effect beginning July 1, 2007.

Interest rates on undergraduate need-based federal loans would be reduced in compliance with the following five steps:

  • Reduced to 6.12 percent in 2007;
  • Reduced to 5.44 percent in 2008;
  • Reduced to 4.76 percent in 2009;
  • Reduced to 4.08 percent in 2010; and
  • Reduced to 3.40 percent in 2011.

According to Democratic leadership, once fully implemented, the rate decreases would save the typical borrower with a subsidized loan debt of $13, 800 approximately $4,400 in interest costs over the life of the loan.

This phase-in of the interest rate reduction was found to be necessary because, under new “pay-go” rules, the budget cost of the plan will need to be paid for with budget cuts (or revenue raisers). It is still unknown how the reduced cost of the plan will be paid for.

The College Student Relief Act of 2007 is slated for debate on Wednesday, January 17, as the fifth piece of House legislation introduced in the 110th Congress. Leadership has indicated that the interest rate proposal is the first component of their agenda to make college more accessible and affordable. The Education and Labor Committee (note Committee name change) will also take a look at such issues as: raising the maximum Pell Grant, addressing tuition costs and examining the effectiveness of both federal loan programs.”


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