This year’s college grads are coming into a tough job market, no doubt about it. But because of a law that Congress enacted in 2007 – the College Cost Reduction and Access Act – they – and many other student borrowers – are going to see a little help with their loans.
We’ll start to see the benefits of the Act, which provides an additional $20 billion in federal aid for students, on July 1. Here are just a few of the major perks:
* Income-based repayment programs. These repayment plans will cap borrower’s monthly loan payments at 15 percent of their discretionary income. If you currently pay more than that – or you will once you start repaying your loans – you’ll be eligible for this repayment plan. After 25 years in the program, your debts will be forgiven.
* Lower interest rates. Rates on need-based loans will continue to drop on July 1, from six percent to 5.6 percent. But they’re not stopping there – this is just the second of four cuts. In 2011, rates will reach 3.4 percent. Compare that with the interest rate on private loans, which often clock in at upwards of 10 percent.
*More Pell Grants. Low and moderate-income students may be eligible for up to $5,350 in Pell Grant scholarships for the 2009 – 2010 school year. That’s about $600 more than last year’s maximum grant, and it’s money you don’t have to pay back.
* Planning to become a teacher? You’re in luck. The Act provides tuition assistance of $4,000 a year (up to $16,000) to students who agree to teach in high-need subject areas in high-need schools upon graduation. You’ll need to commit to stay for four years.
* A bit of old news: Dating back to October, 2007, graduates who commit to enter public service fields – think public defenders or prosecutors, teachers, firefighters, nurses – are eligible to have their loans forgiven after 10 years of working in the field and repaying their loans.