College Kids Get Relief, Congress Passes Cost Reduction Act

This post, written by Kristina Rizga, originally appeared on WireTap Magazine

Yesterday, Pres. Bush signed H.R. 2669, the College Cost Reduction and Access Act, the largest increase in student aid since the GI Bill of 1944. Here's a closer look at some key provisions of the bill, sponsored by Rep. George Miller, (D-California), and Sen. Edward Kennedy, (D-Mass.):

Increasing Pell Grants:

The biggest aid increase would raise the maximum annual Pell grant, the nation's main aid program for low-income students, from $4,300 to $5,400 a year by 2012.

Making It Easier to Repay Loans:

* Ensuring you don't retire in student debt. The program cancels most remaining balances (if there any left) after 25 years. This applies to anyone, who took out federal loans as an undergraduate or graduate student, whether they took them out years ago or recently. (The time period for the 10-year public service cancellation begins October 1, 2007. Project on Student Debt has more details on that.)

*Slashing interest rates on Stafford subsidized loans. The bill would reduce the interest rate on subsidized Stafford loans by half over four years. Subsidized loans go to students who demonstrate financial need. The rate cut would be phased in starting July 1. It would go from 6.8 percent today to 3.4 percent by 2011.

(The bad news is that this rate cut only applies only to new subsidized Stafford loans, not the ones that students have already taken out. It does not apply to unsubsidized Stafford loans either, which students can take out regardless of financial need.)

* Capping loan payment. Starting July 1, 2009, borrowers would not have to devote more than 15 percent of their income to repaying Stafford (federal) student loans. This applies to both subsidized and unsubsidized federal loans, regardless of when the loans were taken out. It's a sliding scale. For more use this helpful calculator by FinAid.org for determining how this would affect you.

Project on Student Debt has more helpful information on key provisions of the bill, such as percentage limits on payments depending on your income, or Public Service Loan Forgiveness program.