College Cost Reduction Act of 2007 (CCRA)

The College Cost Reduction Act was signed into law Sept. 27, 2007, with goals of lowering the cost of higher education by increasing grant amounts to students; improving access to student loans; cutting interest rates on student loans; providing for the repayment of loans through employment in areas of public service; and rewarding colleges for lowering costs to students. Virtually every student using federal loans and grants to fund his or her higher education expenses will be affected by the Act. Early reactions to the Act have been positive, as it appears that students will benefit from greater access to federal funds and more repayment options.

The Act:

  • will reduce interest rates on subsidized loans by 50% over the next five years
  • lowers monthly student loan payments for high debt/low income borrowers
  • “forgives” remaining debt after 10 years for people working in public service jobs (broadly defined including full-time employment in emergency management, government, public defense, military service, public safety, law enforcement, public health, public education, social work, and more)
  • expands access to federal financial aid for students in need

It is important to consider this law as having TWO separate and distinct components:

  • Income Based Repayment Plan (Section 203) – If your debt is high and your income is low, regardless of whether you work in public service, and regardless of whether your federal loans are FFELP (Federal Family Education Loan Program) or Direct, you are entitled to pay back your federal loans through the Income Based Repayment plan (IBR), beginning July 1, 2009, and the remainder of your debt will be forgiven after 25 years.
  • Loan Forgiveness (Section 401) – If you work full-time in public service for a cumulative 10 years, at the end of the 10 years (or after you have made 120 qualifying payments while working in public service) the remainder of your Federal Direct Consolidation loans will be forgiven. For purposes of this Act, only Federal Direct (as opposed to Federal Family Education Loan Program) Loans can be forgiven.  However, you can consolidate or re-consolidate into the Federal Direct Loan Program in order to take advantage of the new law.

These are only highlights of the act. For more information about this legislation, consult these sources: