College, the key to a better paying career, is not without its financial burden. The price of tuition around the country is going up. Plummeting stocks have hurt university portfolios as well as the portfolios of alumni and professors. Because of this, American universities are receiving fewer contributions from private sources even as they continue to pay for tenured senior professors who, having lost their nest-egg, are stalling their retirement. Public universities face these dilemmas as well as a dwindling slice of the state budget that funds them.
Of course, students still need to go to school during these hard times, but the rising price of tuition and the absence of job opportunities for graduates just entering the work force has made the once viable option of student loans less and less attractive as there is little guarantee that a job will be waiting after graduation. Today’s graduating senior can expect to acquire $22,000 in student loans by the time they graduate and have no guarantee of entering into a career just out of school that will help them to pay off this debt.
There is, however, some hope on the horizon for today’s college student. Beginning July 1, for the first time, students and borrowers will be able to participate in a new Income-Based Repayment program that caps their monthly loan payments at just 15 percent of their discretionary income. Any current or future borrower whose loan payments exceed 15 percent of their discretionary income will be eligible. After 25 years in the program, borrowers’ debts will be completely forgiven.
Other benefits include:
- Cheaper interest rates on need-based (subsidized) federal student loans. On July 1, interest rates on these loans will continue to drop, from 6 percent to 5.6 percent. This is the second of four annual cuts in this interest rate; it will continue to drop until it reaches 3.4 percent in 2011. Nationwide, about 5.5 million students take out subsidized student loans each year.
- Higher Pell Grant scholarships for low- and moderate-income students. Due to funding boosts provided by both the College Cost Reduction and Access Act and the American Recovery and Reinvestment Act, the maximum Pell Grant scholarship for the 2009-2010 school year will be $5,350 – more than $600 above last year’s award. About 6 million students receive this scholarship each year.
To encourage more students to become teachers, the law provides up-front tuition assistance, known as TEACH Grants, of $4,000 a year - for a maximum of $16,000 - to students who commit to teaching high need subject areas in high need schools for four years after graduation. (These grants first went into effect for the 2008-2009 school year.)
Graduates who enter into public service careers, such as teachers, public defenders and prosecutors, firefighters, nurses, non-profit workers and more, will be eligible for complete loan forgiveness after 10 years of qualifying public service and loan payments. (This program began on October 1, 2007.)