President Bush signs new legislation: what changed, what didn’t

On September 27, 2007, President Bush signed the College Cost Reduction and Access Act. The new legislation went into effect October 1, 2007. For a breakdown of these changes, see our College Cost Reduction and Access Act highlights chart below.

Because of the new regulations, T.H.E.’s new loan terms for all loans disbursed on or after October 1, 2007, are as follows:

Stafford

  • 0% origination fees
  • 0% default fees through 6/30/2008 (depending on the guarantor, as default fees are annually evaluated by guarantors and are therefore subject to change)
  • T.H.E. Bonus modifications will be announced later

PLUS and Grad PLUS

  • 0% default fees through 6/30/2008 (depending on the guarantor, as default fees are annually evaluated by guarantors and are therefore subject to change)
  • A .25% immediate T.H.E. Bonus continuing throughout repayment; additional T.H.E. Bonus modifications will be announced later

Consolidation

  • We are currently evaluating if we can offer any benefits other than allowing a borrower an extended repayment period on consolidation loans
Highlights of the College Cost Reduction and Access Act
What’s New Who Loses/Who Benefits Requirements Effective Date

Pell Grant Increases

  • $490 for 2008-09 and 2009-2010
  • $690 for 2010-2011 and 2011-2012
  • $1090 for 2012-2013
Benefit — undergraduate students with financial need.
  • Pell Grant awarded based on need analysis; includes an income maximum.
 7/1/2008

TEACH Grants Introduced

  • Grants of up to $4000 per year
  • Not to exceed $16,000 for undergraduates and $8000 for graduate students
Benefit — undergraduate and graduate students who commit to full-time teaching for at least four academic years at a high-need school in a specific field of study.
  • Student must complete teaching service within eight years of graduating or grant aid becomes Federal Direct Unsubsidized Stafford loan.
 7/1/2008

Subsidized Stafford Interest Rate Reductions

  • 6.8% for loans disbursed 7/1/2006-7/1/2008
  • 6% for loans disbursed 7/1/2008-7/1/2009
  • 5.6% for loans disbursed 7/1/2009-7/1/2010
  • 4.5% for loans disbursed 7/1/2010-7/1/2011
  • 3.4% for loans disbursed 7/1/2011-7/1/2012
 Benefit — undergraduate Students.
  • Only for undergraduates
  • Must be in repayment or forbearance to benefit
  • Only temporary decrease, rates increase to 6.8% for loans disbursed after 7/1/2012 (unless government finds a way to continue to pay for the costs).
Varies, first reduction begins 7/1/2008.

Elimination of Debt-to-Income Ratio for Full-Time Employment Borrowers

(DOE to provide guidance –may be changing) 		Loss — high-debt, low- to mid-income borrowers (e.g. medical residents).
  • Borrower working full-time must earn the federal minimum wage of $5.85 per hour or less, or their annual income must be equal to or less than 150% of the federal poverty level (based on family size).
 10/1/2007

Introduction of Income-Contingent Repayment

 Benefit — students with high debt and a career path with low to average income.
  • Loan payments are established at 15 % of the borrower’s income that is more than150% of the poverty line depending on the borrower’s family size
  • Borrower must qualify for plan each year
7/1/2009

Loan Forgiveness Availability

 Benefit — borrowers with Federal Direct Loans may qualify
  • Make 120 monthly payments after 10/1/2007 as part of an income-based repayment plan, standard repayment plan, or income-contingent plan (starting 7/1/2009) based on a 10-year repayment schedule
  • Must work in a public service job for the entire 120 monthly payment period
 10/01/2007
  • October 17, 2007
  • filed under: Industry news