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The College Cost Reduction and Access Act

The College Cost Reduction and Access Act was passed into law in September 2007. Supported by the Project on Student Debt, the new law redirects taxpayer subsidies away from student loan companies and toward increased grant aid and improved benefits for borrowers. Key provisions include:

  • Pell Grant increase – Lower-income students increasingly have had to rely on loans because need-based grant aid has not kept pace with college costs. H.R. 2669 provides enough additional funding to increase the maximum federal grant from the current level of $4,310 to $5,400 in 2012.

  • Income Based Repayment – Modeled on our Plan for Fair Loan Payments, this program assures past, present and future students with federal loans that their payments will be fair and manageable and will not extend indefinitely. For information about how to take advantage of this program, go to

  • Interest rate cut – The law phases in a reduced interest rate on new subsidized Stafford loans to undergraduate students. From the current 6.8 percent, it will be reduced to 6.0 percent starting July 2008, 5.6 percent starting July 2009, 4.5 percent starting July 2010, and 3.4 percent starting July 2011. In July 2012 it will revert to 6.8 percent unless Congress acts.

  • Public Service Loan Forgiveness – Borrowers who spend at least ten years working in public service professions and make certain payments through the Direct Loan program will be able to have any loan balance that remains after ten years forgiven. For information about how to take advantage of this program, go to

Only loans backed by the federal government are affected by the law. The growing private (non-federal) loan market, which represents about a fifth of all student loan volume, is not directly affected by this legislation. (See our Private Loan Policy Agenda.)


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