New law provides financial relief for college students, families

WASHINGTON (10/17/07)--Families with college students finally are getting a break, thanks to new legislation signed into law Sept. 27 that will provide more than $20 billion in federal aid (Kiplinger's November 2007).

The College Cost Reduction and Access Act will offer grants to students who plan to teach, help struggling graduates pay off student loans, and gradually reduce interest rates on federally subsidized loans for low-income students to 3.4% over five years (The Washington Post Sept. 28). It offers loan forgiveness for graduates who have held public service jobs for 10 years and caps payments on federal loans at a certain percentage of the graduate's income.

The lending industry doesn't support the reforms, saying the new law--which slashes federal subsidies to private loan companies--could result in fewer loan benefits for students. One example given by the lending industry was that some borrowers may not be offered interest-rate reductions for timely payments.

Student advocates hail the new law as a victory, particularly given the increase in Pell Grants--need-based federal grants given to low-income students--by $490 next year and $1,350 in the next five years. More students will be eligible for Pell Grants because the income limit increases to $30,000 from $20,000, giving more students help with the high cost of college.

For more information, read "Stay Up-to-Date to Claim Deductions, Credits for College Costs" in Home & Family Finance Resource Center.

courtesy of cuna.org