Durbin Bill Cuts College Loan Interest Rates in Half for Illinois Students

DURBIN BILL CUTS COLLEGE LOAN INTEREST RATES IN HALF FOR ILLINOIS STUDENTS

U.S. Sen. Dick Durbin (D-IL) today unveiled the Reverse the Raid on Student Aid Act of 2006 (RRSA Act), which would make a college education more accessible and affordable. The bill cuts interest rates in half on college loans for student borrowers with the most financial need and for parent borrowers, increases Pell Grant awards and gives students the opportunity to choose the best deals when consolidating loans. Durbin introduced the bill on Friday, April 7, just before the spring recess began. He was joined in his efforts by U.S. Congressman George Miller (D-CA) who has introduced similar legislation in the House.

"Unless we act now, the price of a college education will increase dramatically for Illinois students on July 1st," said Durbin. "New interest rates on student loans could make the price of a higher education unaffordable and cost students the opportunity to get a college education."

Earlier this year, the Republican-led Congress cut $12 billion out of the federal student aid programs in order to help finance tax breaks for the wealthiest Americans. Durbin said that his bill reflects the kind of serious investment that America must make if it wants to ensure college access for all students and remain the world's economic leader.

Durbin's bill would:

# Cut new interest rates that are scheduled to go into effect on July 1st in half- from 6.8 percent to 3.4 percent for students and from 8.5 percent to 4.25 percent for parents. The Durbin bill would apply to all student-subsidized Stafford loans and parent loans.

# Increase the maximum Pell Grant award from $4,050 to $4,500 in 2007 and increase the maximum award to $6,000 by 2011. It would also make the Pell Grant Program a mandatory program, which would guarantee that Pell Grants would be fully funded each year.

# Repeal the "single-holder rule" that prevents students from shopping around for the best deal when they consolidate their student loans.

# Allow students to consolidate their loans while in school in order to lock in low interest rates.

# Ensure the future of the Direct Loan Program by making it a mandatory spending program.

Under this new legislation, the typical undergraduate student borrower with $17,500 in student loan debt would save $5,600 over the life of his or her loan.

Recent reports indicate that, from 2001 through 2006, the price of tuition, fees, and room and board at four-year public institutions has increased by 44 percent. However, over that same five year period, the maximum Pell Grant award has stayed the same. The President's 2007 budget proposed to freeze the maximum Pell grant at $4,050 again this year. Senate Democrats fought to increase the Pell Grant award, but were defeated along party lines. Durbin's bill would ensure full funding for this important program.

Today's students either borrow from Direct Loan Programs, where they are borrowing money directly from their schools at fixed rates, or through the Federal Family Education Loan (FFEL) Program, where students are provided with a list of lenders from which to pick. Under the current "single holder rule" students who have all their loans with one lender are prevented from consolidating with other lenders at better rates when they graduate.

Durbin noted that many high school seniors have to make student loan decisions on their own. "Seventeen year olds -- some of whom have never had a bank account -- are asked to choose a lender from a list of private companies and banks," said Durbin. "Once students graduate, they are often more familiar with the lending process, may discover a company that offers them a lower interest rate-- but find themselves locked in with their current lender."

The Durbin bill repeals the "single-holder rule" which makes it possible for students to consolidate, or work with, an alternate lender after they graduate. The bill also allows students to consolidate while still in school in order to take advantage of lower interest rates.

The President's 2007 budget proposed to make the administrative costs associated with the Direct Loan Program, a discretionary or optional spending program. The Durbin bill secures the future of the Direct Loan Program by making administrative costs part of the Federal Government's mandatory spending.

Durbin's bill has been endorsed by Young Democrats of America, Rock the Vote, USAction, SEIU, US Students Association, AFSCME, Center for American Progress, College Democrats, Campaign for America's Future, Working America, and Campus Progress.

http://durbin.senate.gov/record.cfm?id=254629&&