Aimed at making college more affordable for students overwhelmed with the increasing cost of higher education, four major changes will be phased in on July 1 as part of The College Cost Reduction and Access Act of 2007 (H.R. 2669), passed by the Democratic Congress:

• Cheaper interest rates on need-based federal loans. This marks the second year that the rates of subsidized federal student loans (Stafford loans) will decrease. On July 1 the interest rate will decrease from 6 percent to 5.6 percent.
• Income-Based Repayment Program. July 1 marks the beginning of the Income-Based Repayment Program (IBR). Under the IBR, all current and future borrowers will have their monthly loan payments capped at 15 percent of their discretionary income. Further, the IBR mandates that any remaining debt that a borrower faces after 25 years of repayment, including interest, is completely forgiven. For more about IBR, visit www.IBRinfo.org; for important upcoming reforms to IBR regarding married couples and other special cases, visit www.ibrinfo.org/update_52609.vp.html. 
• Increased funding for Pell Grants. The maximum award for a Pell Grant—which helps the neediest students afford college—increases to more than $600 on July 1, from $4,731 to $5,350. Funding for these grants was made available through both the 2007 Act as well as the American Recovery and Reinvestment Act.
• New loan consolidation opportunities. July 1 also brings good news for students and graduates with variable-rate federal Stafford loans who borrowed before July 1, 2006. This group will be able to consolidate their loans and lock in on the new, lower interest rate (2.48 percent beginning July 1).

These changes add to, and in some cases build upon, other aspects of the 2007 legislation that are already being phased in. TEACH grants will again be available this year, providing $4,000 per year to students who commit to teaching high-need subject areas in high-need schools. In addition, students who choose to enter the public or nonprofit sectors are once again eligible for complete loan forgiveness after 10 years.

More information can be found at:

• http://edlabor.house.gov/college-cost-reduction-and-access-act/index.shtml 
• http://edlabor.house.gov/blog/2009/05/managing-your-student-loans-up.shtml  
• http://projectonstudentdebt.org/july1-2009.vp.html 

For help clarifying or differentiating student loans, be sure to visit http://projectonstudentdebt.org/files/pub/2009-10_loan_terms.pdf.