Student Loan Guide

The College Cost Reduction and Access Act

The student loan industry is being sent to reform school by the federal government.

After public outcry over bank kickbacks to schools and dirty deals on campus, former President Bush signed a law into effect during his time in office that has disbursed billions of dollars the banks stole from taxpayers, students and parents through their atrocious student loan practices.

The College Cost Reduction and Access Act (CCRAA) directly benefits students through 4 main provisions. Here's a quick glance at what's available:

1. Pell Grant increases -- The current level of this free, no-strings-attached money was capped at $4,310/student. By 2012, that limit will rise to $5,400.

2. Interest rate cuts -- A reduced interest rate on new subsidized federal Stafford loans for undergraduate students will be phased in over the next five years. The current rate of 6.8 percent will drop to 6.0 percent in July; then to 5.6 percent in July 2009; 4.5 percent in July 2010; and 3.4 percent starting July 2011.

3. Higher income protection allowances -- Students currently can earn an annual gross income of $3,000 without hurting their financial aid eligibility. That will increase by $750/year over the next four years until it caps out at $6,000 in 2012.

4. Income-based repayment plans -- Payments on federal loans will be capped at a certain percentage of a college graduate's income. If capped payments aren't enough to cover interest charges, the interest on subsidized loans will be covered for up to three years, plus further interest won't compound. This provision, which began July 2009, is available to past, present and future students with federal loans. Visit IBRInfo.org for more assistance.

Student Loan Forgiveness

New student loan forgiveness laws are in place that benefit a wide range of workers. Public service employees will enjoy full loan forgiveness after making 10 years of monthly payments on their federal loans. (Private sector employees must make a 25 years of monthly payments to have their remaining balance wiped away.)

This comprehensive list compiles some of the most popular loan forgiveness opportunities. A state-by-state list of loan forgiveness programs has also been compiled by the American Federation of Teachers. Here are the public service fields that will qualify for loan forgiveness under the CCRAA:

• Government, military service, emergency management, public safety, law enforcement, public health, public education. (In addition, military personnel on active duty will be able to defer payments on their loans, and service members who are returning to civilian life will be able to defer payments for more than a year.)
• Social work in a public child- or family-service agency; public interest law services, including prosecution or public defense or legal advocacy in low-income communities for a nonprofit organization; public child care; public service for individuals with disabilities; public service for the elderly.
• Public library sciences, school-based library sciences and other school-based services.
• Certain employees at nonprofit groups, as defined by the tax code, and full-time faculty members at tribal colleges or universities.