Summary Of The College Cost Reduction and Access Act

President Bush signed The College Cost Reduction and Access Act (H.R. 2669) into law on Sept. 27. These amendments became effective on Oct. 1, 2007, unless otherwise stated. This is a summary of three major new provisions and provides a general overview of the law. In-depth analysis of these provisions and their ramifications is ongoing. At right you will find the full text of HR2669 and other resources.

The act encourages and rewards students that want to pursue careers in public service in government, social work and non-profits. Income based repayment (IBR) places an annual maximum on loan payments based on income level. Coupled with public service loan forgiveness the IBR will allow borrowers working in public service to make affordable monthly payments for ten years, after that the remaining obligation is forgiven.

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Income-Based Repayment (IBR)

Generally, the provisions in this section become effective July 1, 2009.

Loan payments will be limited to 15 percent of a borrower's discretionary income or 15 percent of the amount that a borrower's (and spouse's if applicable) adjusted gross income (AGI) exceeds 150 percent of the poverty line, divided by 12. Unpaid interest and principal are capitalized and any outstanding loan balance is forgiven after 25 years of repayment.

AGI – (State poverty level x 1.5) x 0.15 = annual payment
Monthly payment: annual payment / 12 = monthly payment


  • A borrower with $80,000 in loans (Stafford/GPLUS)
  • Weighed average of 7.5% interest rate
  • AGI of $55,000
  • The Federal poverty level for a family of 1 in 2007 is $10,210*
  • 150% of the poverty level is $15,315  

$55,000-$15,315 x 0.15= annual payment
$55,000-$15,315=$39,685 or discretionary income  
$39,685 x 0.15= $5,953 annual payment
$496=monthly payment  

Comparing IBR to Standard Repayment:  

Standard 10 year repayment schedule on $80,000= $11,389 annually or $949 per month  
Income-Based Repayment=$5,953 annually or $496 per month
The difference: $5,436 annually or $453 per month  

Loan Forgiveness (Public Service)   

The proposed legislation would allow the Secretary of Education to cancel the balance of any interest and principal due on any Federal Direct Loan - including Direct Stafford, PLUS, or Consolidation Loan - that is not in default for borrowers who:

  • Have made 120 monthly payments on a Direct Loan after October 1, 2007 as part the new income based repayment plan, income contingent repayment plan or a standard repayment plan based on a 10-year repayment schedule
  • Are employed in a "public service job" and has been employed in a public service job during the 120 payment period.

A public service job is defined as a full-time job in emergency management, government, military service, public safety, law enforcement, public health, public education, 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.

Summary information from the National Association of Financial Aid Administrators (NASFAA).

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