Student Debt Relief Act Bill Summary

Millions of students and families across the country are struggling to pay for college. Because of the high cost of tuition, more and more students are forced to take out loans to finance their education, leaving them deeper and deeper in debt. The Student Debt Relief Act takes important steps to address this growing crisis:

Pell Grants: The purchasing power of the Pell Grant – the lifeline to college for low-income students—has not kept up with the rising cost of college. To restore the Pell Grant, the Student Debt Relief Act immediately increases Pell Grant maximum to $5,100 with mandatory funding; and provides additional Pell Grant increases through enactment of Student Aid Reward Act (STAR Act), which reforms the student loan programs and generates savings to use for student aid by encouraging schools to use more efficient of the two federal loan programs.

Interest Rates: The bill cuts interest rates in half (from 6.8 percent to 3.4 percent) for new subsidized undergraduate student loans over 5 years.

Debt Relief: To help borrowers struggling with excessive student loan burdens, the Act gives borrowers the option of having federal student loan payments capped at 15% of their monthly discretionary income, and forgives student loans after 25 years.

Public Service Loan Forgiveness: The Act provides loan forgiveness for public sector employees after 10 years.

Consolidation/Reconsolidation: The Act allows students to reconsolidate loans and repeals the elimination of in-school consolidation.

Origination Fees: The Act reduces origination fees in Direct Loan program by 1% to put it on a level playing field with the FFEL program, and gives the Secretary of Education explicit authority to reduce origination fees (as FFEL lenders have).

Direct Loan/Student Aid Administrative Funds: The Act repeals a provision that moved Direct Loan administrative funds to the discretionary side of the budget. It restores these funds as mandatory, to ensure the continued operation of the student aid programs.

College Tuition Tax Deduction/Student Loan Interest Tax Credit: The Act extends the college tuition tax deduction, and increases the allowable deduction to $12,000.

Students and their families clearly recognize the importance of a college degree, but are struggling with the financial challenges that come with it. The Student Debt Relief Act offers practical measures to ease this burden and make college possible for many more students.