Sen. Kennedy Introduces Student Debt Relief Act

Sen. Edward Kennedy, D-Mass., the new chair of the U.S. Senate Committee on Health, Education, Labor, and Pensions, has introduced legislation that would, among other things, increase the maximum Pell-Grant award, cut student-loan interest rates in half, and provide additional Pell-Grant funding to schools that participate in the Federal Direct Loan Program.

In introducing the Student Debt Relief Act of 2007, Kennedy said, “It’s a comprehensive plan to ease the double blow of soaring college costs and heavy student-loan burdens.”

The legislation includes the following provisions:

• Raises the maximum Pell-Grant award from the current $4,050 to $5,100 for the 2007-2008 academic year and to $6,300 for the 2011-2012 academic year.
• Gives colleges “new incentives to offer loans to students through the Direct Loan program.”
• Cuts interest rates on new subsidized Stafford loans to undergraduate students from the current 6.8 percent to 3.4 percent during the next five years, although the lower rate is available only until July 1, 2012.
• Provides loan forgiveness after 10 years of repayment for certain public-service employees.
• Permits Stafford and Grad PLUS borrowers to have their monthly payments limited to 15 percent of their monthly income and have their loans forgiven after 25 years of repayment.
• Restores in-school consolidation and permits re-consolidation.
• Reduces origination fees in the direct-loan program.
• Increases the federal income-tax deduction for higher-education expenses from the current $4,000 to $8,000 in 2007 and to $12,000 in 2008 and subsequent years.
• Establishes a federal income-tax credit of up to $1,500 for interest paid on student loans, subject to income limitations.

The bill is co-sponsored by Sen. Barbara Milkulski, D-Md., Joseph Lieberman, I-Conn., Charles Schumer, D-N.Y., Richard Durbin, D-Ill., and Barack Obama, D-Ill.