Making college accessible and affordable should be a national priority. As a former teacher, I value the importance of education and believe that students should not be denied access to higher education because of financial hardship. I have created this student resource page to provide important links and information on federal student loans and the various repayment options.

In 2007, Congress passed and the President signed into law the College Cost Reduction and Access Act. This monumental legislation provides a significant increase in college aid, increases Pell Grant scholarships by nearly $12 billion, and will cut student loan interest rates in half over the next four years.

Federal interest rates on subsidized federal Stafford loans for undergraduates were first reduced on July 1, 2008 to 6 percent from the previous 6.8 percent. Beginning July 1, 2009, the interest rates dropped to 5.6 percent. Effective July 1, 2010, interest rates will drop to 4.5 percent, and down to 3.4 percent on July 1, 2011.

If you are one of the more than 33,000 Arizona students who currently take out student loans, I hope that you will find the information useful.

Sincerely,

Harry

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Benefits in effect as of July 1, 2009

Cheaper interest rates on subsidized Federal Student Loans: Effective July 1, 2010, Interest rates on subsidized federal student loans will decrease from 5.6 percent to 4.5 percent.

Reasonable and affordable monthly college loan payments for borrowers: On July 1, 2009, a new Income-based Repayment program will go into effect that caps borrowers' monthly loan payments at just 15 percent of their discretionary income. Any current or future borrower whose loan payment exceeds 15 percent of their discretionary income is eligible. After 25 years in the program, borrowers' debts will be completely forgiven.

Higher Pell Grant scholarships that cover the average tuition at public universities: Due to funding provided by both the College Cost Reduction and Access Act and the American Recovery and Reinvestment Act, the maximum Pell Grant for the 2009-2010 school year will be $5,350 - over $600 above last year's award.

TEACH Grants: To encourage more students to become teachers, the law provides up-front tuition assistance of $4,000 a year for a maximum of $16,000 to students who commit to teaching high need subject areas in high need schools for four years after graduation.

Loan Forgiveness for Public Service: Graduates who enter into public service careers such as teachers, public defenders, and prosecutors firefighters, nurses, nonprofit workers and more will be eligible for complete loan forgiveness after 10 consecutive years of public service and loan payments (began October 1, 2007).

Who Qualifies for Income-Based Repayment?

Borrowers who currently are paying back federal student loans and new borrowers, whose debt exceeds 15 percent of their discretionary income. Borrowers with hefty debt loads or low-paying jobs are most likely to qualify.

The program covers all federal loans - both Direct and Federal Family Education loans - made to students, including Stafford, Grad PLUS and federal consolidation loans, but not those made to parents (PLUS loans). Perkins loans are also eligible if a borrower consolidates them into a FFEL or Direct Loan.

A borrower must also have enough debt relative to their income to qualify for a reduced payment. If a borrower earns below 150 percent of their poverty level for their family size, their payment will be $0. If they earn above it, their payment will be capped at 15 percent of whatever their income is over that amount

What kind of aid can the federal government provide?

Aside from federal work-study programs, the federal government offers grants and loans to students and their parents.

Grants (Financial aid that is not repaid.)

• TEACH Grants: These grants, which were newly created by the College Cost Reduction and Access Act, provide upfront tuition assistance to qualified undergraduate students who commit to teaching in public schools in high-poverty communities and high-need subject areas. Undergraduate recipients may receive $4,000 a year, with a maximum of $16,000 over four years. (Graduate recipients may receive a maximum of $8,000 over two years.) These grants first went into effect for the 2008-2009 school year.
• Pell Grants: Pell Grants are awarded usually only to undergraduate students who have not earned a bachelor's or a professional degree. Due to funding provided by both the College Cost Reduction and Access Act and the American Recovery and Reinvestment Act, the maximum Pell Grant scholarship for the 2009-2010 school year will be $5,350 - more than $600 above last year's award. At this level, the Pell Grant will be able to cover a year of tuition at most public universities and community colleges.
• Other grants
  

Loans (Financial aid that must be repaid with interest.)

• Stafford Loans:

Subsidized Stafford Loans' interest rates will drop to 4.5 percent on July 1, 2010 for loans made to undergraduate borrowers, thanks to the College Cost Reduction and Access Act. A subsidized loan is awarded on the basis of financial need. If you're eligible for a subsidized loan, the government will pay (subsidize) the interest on your loan while you're in school, for the first six months after you leave school, and if you qualify to have your payments deferred.

Unsubsidized Stafford Loans carry a rate of 6.8% for undergraduate borrowers. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it's paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (added to the principal amount of your loan). Capitalizing the interest will increase the amount you have to repay.

• PLUS Loans for parents
• PLUS Loans for graduate and professional degree students

Other programs

• Loan Forgiveness for Public Service Workers: Recent surveys also show students' interest in public service jobs is surging. Graduates who enter into public service careers, such as teachers, public defenders and prosecutors, firefighters, nurses, non-profit workers and more, will be eligible for complete loan forgiveness after 10 consecutive years of public service and loan payments. (This program began on October 1, 2007.)
• Income-Based Repayment Program: On July 1, a new Income-Based Repayment program will go into effect that caps borrowers' monthly loan payments at just 15 percent of their discretionary income (15 percent of what a borrower earns above 150 percent of the poverty level for their family size). Any current or future borrower with federal student loans is eligible. After 25 years in the program, borrowers' debts will be completely forgiven. More information on IBR
  

How do I apply?

To get federal student aid, you'll need to fill out a Free Application for Federal Student Aid (FAFSA) form. The FAFSA is also used to apply for aid from your state or school. To apply, you'll need your Social Security Number, driver's license, income tax returns, bank statements, and investment records. (Congress passed the Higher Education Opportunity Act to simplify this process: the bill, which passed the House on July 31, 2008 and was signed into law on August 14, 2008, includes provisions to simplify the FAFSA.)

When must I apply?

You may submit your FAFSA as early as January 1 of each year. It's best to file early since deadlines may vary for state, school and private aid. Be sure to check with your state, school, and lenders for their individual deadlines.

Helpful Links and Resources

Income Based Repayment (IBR) Calculator

Arizona Republic: For modest earners, relief repaying student loans

United States Department of Education

Student Aid on the Web