WASHINGTON, D.C. – Today Congresswoman Lois Capps (D-CA) applauded the reduction of the federal student loan rate.  The federal interest rate was reduced from 6.8 to 6 percent, the first of four scheduled rate cuts that will make need-based federal student loans more affordable for students and their families.  The rate reductions were a key part of the College Cost Reduction and Access Act (H.R. 2669), legislation passed last year by the Democratic-led Congress which was the single largest investment in college financial aid since the 1944 GI Bill. 

“This rate reduction is an important first step as we work to make higher education more affordable and accessible for our students and their families,” said Capps.  “This financial assistance is particularly important as more families are struggling to make ends meet in these difficult economic times.  Obtaining a college education is a key part of the American Dream and ensuring that the cost of higher education doesn’t prevent students from pursuing their academic and professional dreams is a top priority for the Democratic-led Congress.  I’m proud that we delivered on our promise to pursue a historic increase in student aid.  This law will help make college more accessible for our students and their families without burdening them with crippling debt.  It will also encourage students to pursue careers in public service, like nursing and police work.  I can’t think of a better investment for America’s future than investing in our young people’s educational pursuits.  It’s a wise use of public funds and will ensure that America remains competitive in the global economy."

In California approximately 228,000 students take out need-based loans each year at 4-year public schools and the average graduate accumulates over $15,000 in student loans.  By cutting the interest rates from 6.8 percent to 6 percent today, the average student starting a 4-year college in California this September is saving $2,820 over the course of their loan. 

In addition to significantly cutting the interest rates on need-based student loans, the College Cost Reduction Act of 2007 took several steps to help students and their families’ meet rapidly increasing higher education costs.  It increased the maximum value of the Pell Grant scholarship by $1,090 over the next five years, reaching $5,400 by 2012. This increase dramatically strengthens the purchasing power of the scholarship, which has not kept pace with ever-increasing tuition rates. In California over half a million low- and moderate-income students will benefit from this latest increase.

In addition, the law prevents student borrowers from facing unmanageable levels of federal student debt by guaranteeing that borrowers will never have to spend more than 15 percent of their yearly discretionary income on loan repayments and by allowing borrowers in economic hardship to have their loans forgiven after 25 years. 

Finally, the law supports and encourages students to pursue careers in public service.  The legislation offers up-front tuition assistance of $4,000 per year for excellent undergraduate students who agree to teach in the nation’s high need public schools and provides up to $5,000 in loan forgiveness for college graduates that go into public service professions.  Public servants in critical positions such as firefighters, nurses, and police officers also receive complete loan forgiveness after 10 years of service.

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Pictured above: (center) Congresswoman Capps meets with Central Coast firefighters to discuss emergency preparedness.