On February 8, 2006 President Bush signed the Deficit Reduction Act into law. This bill cut $12.7 billion in student loans and also eliminated in - school consolidation and reconsolidation, tools students and parents used to lower the cost of education

On October 1, 2007 President Bush signed into law a new act known as the College Cost Reduction and Access Act of 2007. This law will cut payments to lenders for issuing federal loans by $21 billion over five years.

The law reduces the cost to only undergraduates who receive subsidized Stafford loans which already by law do not accumulate interest while the borrower is in school or deferment. The act will lower the rate on undergraduate subsidized Stafford loans to 3.4% from 6.8% by 2011.

The enactment of the law may also raise the cost of borrowing because lenders may reduce or eliminate borrower discounts on new federal loans.

Lenders used discounts to compete for borrowers of federal student loans including Stafford, PLUS and Consolidation loans. Borrower benefits typically included interest-rate reductions for signing up to have payments automatically debited from a bank account or for making a certain number of on-time payments.

Some lenders have already announced their borrower benefit changes and others are still evaluating their programs. You are encouraged to contact EMRA-CELS Program lenders and any federal student loan lender you are considering to apply for a federal loan to identify and confirm the lender’s most current and available borrower discounts.