Interest Rates - Federal Student Loans

Congress passed legislation Friday, June 29, 2012 to extend the 3.4 percent interest rate on subsidized Stafford student loans for one year. The bill temporarily delays the rate from doubling to 6.8 percent on July 1, 2012. Experts estimate that this change will reduce costs for these borrowers by as much as $1,000 over the life of repayment or $6 to $9 per monthly payment.

PLEASE NOTE: We do not anticipate that Congress will pass a second extension that would allow the interest rates on federal stafford loans to remain at 3.4% . For planning purposes, you should assume that the interest rate will increase to 6.8% on July 1, 2013.

Background on Interest Rates for the Stafford Loan Program

On February 8, 2006, President Bush signed The Deficit Reduction Act of 2005 into law. This legislation makes a number of changes in the federal student loan programs including:

  • For new Stafford student loans disbursed July 1, 2006 and later, the interest rate will be set at a FIXED RATE of 6.8 %;
  • For Federal Direct PLUS Loans disbursed on or after July 1, 2006, the interest rate is fixed at 7.90
  • Interest rates on existing loans are not affected and will remain the same

President Bush signed The College Cost Reduction and Access Act (H.R. 2669) into law on Sept. 27, 2007. The bill gradually cuts interest rates on subsidized Stafford loans for undergraduate students in between the 2008-2009  and the 2011-2012 academic years. If Congress fails to act, the interest rate will jump back to a fixed rate of 6.8% for all students effective July 1, 2013.

The Ensuring Continued Access to Student Loans Act of 2008("ECASLA") was originally approved by the House of Representatives on April 17, 2008. President Bush signed it into law on May 7, 2008.& The legislation set new undergraduate Stafford loan limits effective July 1, 2008.

Federal PLUS  / Grad PLUS  Interest Rates

PLUS loans are available to parents of dependent undergraduate students. Families do not need to complete the FAFSA to apply for a PLUS loan. (Grad PLUS Loans are available to Graduate and Professional Students starting on July 1, 2006).

Origination Fees  for 2013-2014

  • For Direct Subsidized and Direct Unsubsidized Loans where the first disbursement of the loan is after the sequester takes effect (3/2/13), the current loan fee of 1 percent of the principal amount of a loan will increase. We presently anticipate that the rate will increase to approximately 1.05 percent. With such an increase, for example, the fee on a loan for $5,500 would increase from $55.00 to $57.75, an increase of $2.75.  We will provide the actual increased percentage when it becomes available.
  • For Direct PLUS Loans for both parent and graduate and professional student borrowers where the first disbursement of the loan is after the sequester takes effect (3/2/2013), the current loan fee of 4 percent will increase. We presently anticipate that the rate will increase to approximately 4.20 percent. With such an increase, for example, the fee on a $10,000 Direct PLUS loan would increase from $400.00 to $420.00, an increase of $20.00. We will provide the actual increased percentage when it becomes available.

 

 

Updated March 5, 2013