Covered by the College Cost Reduction and Access Act
The largest overhaul of college financial aid was signed into law in October of 2007. How does that help students and exactly what does it look like.
The College Cost Reduction and Access Act will work for students in several different ways. The first way is that the Pell Grants will begin increasing and will be paying out up to $5,400.00 per student per year by the year 2012. The recipients of Pell Grants are low income students for the most part and have had to rely more on loans in recent years because the grant was not providing as much as it should for these students.
The second way that this law will help students is that is will cut the interest rate on federally subsidized loans for five years. The rate will go down a little bit every year until 2012 when it will return to 6.8% unless another law is enacted on the behalf of college students.,
Another way that this law will help students is that the repayment programs for the federally subsidized loans will begin to offer income-based repayment plans. This will begin in the July of 2009 and will be open to those who have federal student loans, whether from the past or the present of for the futures. Students who have invested in a college education in the past come out of college with lower paying jobs than they expected, thus putting a strain on their ability to repay the loans they received. This program aims to help them by capping the loan payments at a reasonable interest rate. This rate will be based on the borrower’s income. Therefore, if the borrower is being paid in the low range, the percentage cap will be lower. If he or she is being paid more, his or her percentage cap will be larger.
Another item relating to the College Cost Reduction and Access Act is the ability of the law to cancel the student loan debt after 25 years for the average payee and after 10 years for those who choose a public service career.
For students now, however, the law will raise the amount of money that a student can earn before they have to worry about eligibility for federal student financial aid. Right now, a dependent student has the ability to earn up to $3,000.00 per year before they have to worry about how it affects their financial aid. This law will increase this by increments until 2012 when the new per year earnings will be $6,000.00.
As gas, food, and living expenses continue to increase, this should be welcome news to anyone who will find themselves in need of a federally subsidized student loan in the next few years.
