New Student Loan Education Law Passed in Congress

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New Student Loan Education Law Passed in Congress
September 08, 2007 by R.B. Recommend

According to an American Association of Collegiate Registrars and Admissions Officers (AACRAO) press release, a new landmark student loan education law has been passed in Congress. The full text of the legislation can be found here.

The new law (HR 2699) is known as the Higher Education Access Act. It revises previous laws regarding student aid and covers virtually every aspect of Federal student aid. The new Higher Education Access Act increments benefits for current and future student borrowers.

There are some key elements of the new law. For example, it cuts interest rates in half by 2012. This is certainly good news for borrowers who see interests rates excruciating on their incomes. Also, the law limits the loan repayments to 15 percent of discretionary income and allows borrowers to remain in income-based repayment for more than 10 years. Borrowers employed in certain public service fields may have their loans forgiven after 10 years or 25 years for non public service fields income-based repayment borrowers.

The new Act also establishes a new programs One on them is called "Teacher Education Assistance for College and Higher Education (TEACH) Grants." This is for student pursuing careers that will end in they being employed as teachers at secondary schools. These new grants provide $4,000 per year (with a maximum total of $16,000 for undergraduates and $8,000 for graduate students. Another new program is named College Access Challenge Grants that provides states with a 2 to 1 match on all dollars spent on increasing access for underserved groups.

An equally important provision of the new law increases funding for historically black colleges and universities and minority serving institutions. This is to increase access to higher education for traditionally affected ethnic groups.

You may be asking yourself: "How is this new law going to be financed?" According to the AACRAO press release the funding for this new act will come from cuts to lender subsidies and payments to guarantee agencies.

Funds will be raised for paying these new programs and actions by making some changes to the actual financing of student loans, for example, by reducing the insurance paid by the federal government on defaulted loans from 98 percent to 97 percent through 2012 and to 95 percent thereafter, increasing a fee paid by lenders to the Department of Education from 0.5 to 1 percent of the principle at a loan's origination (not passed to borrowers), and Decreasing payments from the Department of Education to guarantee agencies for account maintenance.

A new law has been passed to aid people in the US to have access to the always-wanted Higher education in the US. This seem to be a great step in the right direction to improve the US in competition.

Sources:

Congress Passes Landmark Student Loan Legislation. AACRAO transcript. URL: http://www.aacrao.org/transcript/index.cfm?fuseaction=show_view&doc_id=3655