WASHINGTON - New benefits have taken effect that make student loans more affordable to repay by allowing borrowers to cap their monthly loan payments at a reasonable percentage of their income.  Representative Edolphus “Ed” Towns (NY-10) today announced that certain eligible low- and moderate-income students taking out new federal student loans will pay lower interest rates and have access to higher Pell Grant scholarships.

“An affordable college education is essential to achieving the American dream.  This new program gives our students the help they need to get a quality college education that will propel them to future success,” said Rep. Towns.  

The benefits kicked in on July 1, 2009, as part of the College Cost Reduction and Access Act (H.R. 2669) which Rep. Towns helped enact in 2007.  The legislation invested $20 billion in college aid for families, at no additional cost to taxpayers – the single largest investment to help Americans pay for college since the GI Bill.

Borrowers are now able to participate in a new Income-Based Repayment program that caps their monthly loan payments at just 15 percent of their discretionary income (defined as 15 percent of what a borrower earns above 150 percent of the poverty level for their family size).  Any current borrower whose loan payments exceed 15 percent of their discretionary income will be eligible, and after 25 years in the program, borrowers’ remaining loan balances, including interest, will be forgiven.  

Other benefits that have gone into effect:
•    Cheaper interest rates on need-based (subsidized) federal student loans.  Interest rates on these loans will continue to drop, from 6 percent to 5.6 percent.  This is the second of four annual cuts in this interest rate; it will continue to drop until it reaches 3.4 percent in 2011.  Nationwide, about 5.5 million students take out subsidized student loans each year.

•    Higher Pell Grant scholarships for low- and moderate-income students.  Due to funding boosts provided by both the College Cost Reduction and Access Act and the American Recovery and Reinvestment Act, the maximum Pell Grant scholarship for the 2009-2010 school year will be $5,350 – more than $600 above last year’s award.  About 6 million students receive this scholarship each year.
In addition, Americans will continue to be able to enter into a new public service loan forgiveness created under the law.  College graduates – or workers of any age – who enter public service professions will have their federal college loans completely forgiven after ten consecutive years of service and loan repayments.  Eligible public servants include firefighters, public defenders and prosecutors, first responders, law enforcement officers, early childhood educators and men and women serving in the military, and more.  This program can be used in conjunction with Income-Based Repayment.
Recent data shows that Americans’ interest in public service is surging.  This year’s applications for programs like Teach for America and AmeriCorps have skyrocketed by 42 percent and 200 percent, respectively.

For more information on these benefits, click here.

“This college affordability measure makes a long-term investment in the future of our country.  It truly is a remarkable opportunity for our young people,” added Rep. Towns.

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