Congress gave final approval on September 7th to a compromise budget reconciliation bill that would provide the largest increase in federal student aid since the GI Bill. The College Cost Reduction and Access Act (H.R. 2669), which slashes government subsidies to student-loan companies and uses the savings to reduce the federal deficit, raises the maximum Pell Grant, and halves the interest rate on subsidized student loans, and creates a new loan forgiveness program, passed by a vote of 79 to 12 on the Senate floor and in the House by a vote of 292 to 97. The bill next moves to the President for his signature.

Below are highlights of The College Cost Reduction and Access Act:

• Cuts more than $20 billion in government subsidies to institutions that make student loans, and uses most of that money to pay for increased financial aid for college students;
• Increases the maximum Pell grant, which goes to the poorest college students, from $4,310 a year to $5,400 a year by 2012;
• Cuts interest rates on federally backed student loans from 6.8 percent to 3.4 percent over the next four years;
• Creates a new loan-forgiveness program for direct-loan borrowers who work for 10 years in public service professions;
• Increases the authorized funding level for the Upward Bound program to $57,000,000;
• Establishes the Teacher Education Assistance for College and Higher Education (TEACH) Grant program providing $4,000 a year to students who agree to serve as a full-time teacher for at least four academic years at a high-need school;
• Creates the "College Access Challenge Grants" to provide a two-to-one matching state grant program to be spent on efforts to increase college access and success among underserved student populations.

New Loan Forgiveness Program for Public Sector

H.R. 2669 creates a new loan forgiveness program for direct-loan borrowers who work in public-service fields for 10 years. The legislation now allows the Department of Education to cancel the balance of any interest and principal due on any Federal Direct Loan - including Direct Stafford, Direct PLUS, or Direct Consolidation Loan - that is not in default for borrowers who:

• Have made 120 (i.e., 10 years) monthly payments on a Direct Loan after October 1, 2007,and
• Are employed in a "public service job" and have been employed in a public service job during the 120 (i.e., 10 years) payment period.

A public service job is defined as a full-time job in

• public health, (licensed professional counselor),
• public education, (e.g., school counselor),
• emergency management,
• government,
• military service,
• public safety,
• law enforcement,
• social work,
• public interest law services,
• child care,
• public library sciences, or
• any other job at an organization that is described in section 501(C)(3) of the Internal Revenue Code of 1986.

For information on the new loan forgiveness program, borrowers should visit the U.S. Department of Education’s Direct Loan Servicing web site at https://www.dlssonline.com/borrower/BorrowerWelcomePage.jsp, or call (800) 848-0979 or (315) 738-6634, FAX: (800) 848-0984, TDD: (800) 848-0983.