Federal Student Loan Interest Rates Drop

July 7, 2008

Federal student loan interest rates dropped last week for need-based students, which will save the average borrower approximately $2,570 over the life of the loan.

The College Cost Reduction and Access Act decreased interest rates on need-based federal student loans from 6.8 percent to 6.0 percent. The goal is to reduce interest rates to 3.4 percent over the next few years.

“With our economy putting enormous financial strains on Americans and tuition prices continuing to soar, these new financial aid benefits could not be coming at a more critical time for college students,” said Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, and one of the authors of the law. “As families continue to explore their financial aid options for the coming school year, it is crucial to make sure that students are fully aware that significant financial relief, whether in the form of cheaper student loans, increased grant aid, or up-front tuition assistance, is available to help them pay for college this fall.”

Other perks included in the College Cost Reduction and Access Act, Pell Grants will be increased by $490, the first step to increase the Grant by $1,090 over the next few years. The Act will also provide up-front tuition assistance to college students who commit to teaching high-need subjects in high-need public schools after graduating: $4,000 annually is awarded to undergraduates (maximum $16,000) and $4,000 for graduate students with a maximum of $8,000. Students who choose public service professions will be provided with “loan forgiveness” after 10 years. The benefits of the College Cost Reduction and Access Act will provide no additional cost to taxpayers.


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