Interest Rates on Subsidized Student Loans Have Been Cut in Half With Last Cut on July 1st

WASHINGTON, D.C. -- Today, Congressman Steve Cohen (D-TN-9) announced that on July 1st the interest rate on subsidized student loans will be cut to 3.4% -- the last of four steps to cut this interest rate in half over four years, under the 2007 College Cost Reduction and Access Act enacted by a Democratic-led Congress. Due to these cuts, the typical student borrower who started college in 2008 will have saved $2,570 over the life of their loan. Millions of students take out subsidized student loans each year. Under this Act, the interest rate on subsidized student loans has been cut as follows:

• On July 1, 2008, the interest rate was cut from 6.8% to 6.0%;

“We all want our children to get a high quality education,” said Congressman Cohen. “Helping our children get a good education will help America continue to be a global leader and compete in a rapidly changing 21st century economy. For 18 years, I worked tirelessly to initiate and pass the Tennessee Lottery to fund college scholarships, after-school programs, and pre-K education for Tennessee’s students. I am proud to continue working to improve education from the U.S. House of Representatives so our kids can get the opportunities necessary to succeed.”

The cutting of the interest rate on these subsidized student loans in half – from 6.8% to 3.4% over four years – was enacted as part of the Democratic-led Congress’s agenda to make college more affordable and accessible for millions of American students. Democrats believe that making college more affordable is one of the most important things we can do to invest in our nation’s future and build a stronger middle class.

Also, on July 1, due to provisions in the 2008 Higher Education Opportunity Act, new college affordability information will become available to young people and their families on the Department of Education website. This information will help prospective college students and their families shop for the best value – based on their individual circumstances -- for a college education. This new information will provide students and their families early estimates of their expected college costs, and allow them to estimate the annual and total cost of a college education at the individual colleges or universities they are interested in. Also available will be information on incentives for attendance, such as need-based aid, that individual colleges and universities may be offering.

In addition to cutting interest rates in half and requiring new online college affordability information, the Democratic-controlled Congress, between 2007 and 2010, took numerous other steps to make college more affordable, including the following:

• Increasing Maximum Pell Grant. Between 2007 and 2010, the Democratic-led Congress increased the maximum Pell Grant from $4,050 to $5,550 (after GOP-led Congresses had frozen the maximum Pell Grant for four years, despite the rapidly rising cost of colleges). Increasing Pell Grants has been a critical component of Democrats’ agenda to make college more affordable for millions of America’s young people. Currently, there are about 9 million students receiving a Pell Grant to help pay for the costs of college. Click here for district-by-district information on the number of Pell Grant recipients and the total Pell Grant aid provided in each congressional district, prepared by the Department of Education, for the 2011-2012 academic year.
• Income-Based Repayment Program. The Democratic-led Congress established the Income-Based Repayment Program, that began on July 1, 2009, which makes student loan payments more manageable for student borrowers by guaranteeing that borrowers will not have to pay more than 15 percent of their discretionary income in loan repayments.
• Public Service Loan Forgiveness. The Democratic-led Congress also established the Public Service Loan Forgiveness Program, that began on October 1, 2007, under which graduates who enter into public service careers, such as teachers, public defenders, firefighters, nurses, non-profit workers and more, are eligible for complete loan forgiveness after 10 years of qualifying public service and loan repayments.