Cut Student Loan Rates In Half

The College Student Relief Act of 2007, which passed the House by 356-71 on January 17, 2007, will make college more affordable and accessible by cutting the interest rates on subsidized student loans in half -- from the current 6.8 percent to 3.4 percent.

Today's college students are graduating with increasing levels of student loan debt. The average student graduates with $17,500 in loan debt; almost 45 percent more than just 11 years ago.

Recent changes to the student loan programs set higher loan rates for students: student rates are now fixed at 6.8 percent.

With the cost of college spiraling out of control, Democrats' College Student Relief Act of 2007 will cut interest rates in half on loans for middle class borrowers to a fixed rate of 3.4 percent, saving the average student thousands over the life of his or her loans.
 

The College Student Relief Act of 2007 Will...

...cut interest rates in half for undergraduate students with subsidized student loans -- those most in financial need -- over the next five years at no new cost to taxpayers. The plan will begin by cutting interest rates to 6.12% on July 1, 2007, and will continue to decrease rates until they reach 3.4% in 2011.

Cutting Interest Rates in Half: Phase-In Schedule
*All interest rate changes will take place in July 1 of each year

The College Student Relief Act of 2007 Will Meet All Pay-Go Rules By...

...increasing efficiency in the student loan programs and redirecting all savings directly back into the hands of students.

Collectively, the offsets below will pay for the entire cost of cutting interest rates in half.

Five of the six offsets below have been proposed in the President's Budget, or were already debated and passed in the House or Senate Committees during Budget Reconciliation last year, but were not enacted into law.

Offsets include:

1. Decrease lender Special Allowance Payment (SAP) rate by 0.1 percentage point. This provision exempts the lowest 10% of cumulative volume in the student loan market. The bill protects 99% of the banks in the program.
2. Lower lender insurance rates for private lenders to 95%.
3. Eliminate "Exceptional Performer" Lender Status.
4. Increase lender origination fees to 1%.
5. Lower guaranty agency collection fees to 20% next year and to 16% by 2010.
6. Increase the annual fee to 1.30% on consolidation loans. This provision only applies to banks with 90% or more of their holdings in consolidation loans.