If you happen to have a federal Stafford or PLUS Loan issued on or after July 1, 1998 but before July 1, 2006, you’re in the golden window. That’s because starting July 1, 2009, the interest rates on these loans (which reset each July 1st) will drop to the lowest rates in the history of the federal student loan program. The new interest rate on Stafford Loans in repayment will be 2.48%, down from 4.21%; the new rate on in-school, grace, or deferment status Stafford Loans will be 1.88%, down from 3.61%; and the new rate on PLUS Loans will be 3.28%, down from 5.01%. These rates will be in effect through June 30, 2010.
If you have more than one variable-rate loan, you can consolidate them and change your interest rate from a variable rate to a fixed rate. The interest rate on a federal consolidation loan is a fixed rate that’s equal to the weighted average of the current applicable interest rates on the loans being consolidated, rounded up to the nearest 1/8th of a point. To see if you’re eligible and to apply for loan consolidation, visit www.loanconsolidation.eg.gov.
If you’re one of the unlucky ones with a federal loan issued on or after July 1, 2006, your interest rate is higher, and fixed for the life of the loan. For unsubsidized Stafford Loans, the rate is 6.8% (“unsubsidized” means the government doesn’t pay the interest during school, grace or deferment periods); for PLUS Loans, the rate is 8.5% (looks like Uncle Sam is making out nicely here). For subsidized Stafford Loans, the interest rate will drop as follows over the next few years:
• 5.6% for loans first disbursed on or after July 1, 2009, and before July 1, 2010
• 4.5% for loans first disbursed on or after July 1, 2010, and before July 1, 2011
• 3.4% for loans first disbursed on or after July 1, 2011, and before July 1, 2012
Filed under: Education | Tagged: Stafford Loan, PLUS loan, variable rate student loans, loan consolidation
