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Graduated Interest
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| Parent(s) |
Issue
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| Contributor | RP |
| Last Edited | RP Jun 19, 2006 05:06pm |
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| Category | Analysis |
| Media | Newspaper - Washington Post |
| News Date | Sunday, June 18, 2006 11:00:00 PM UTC0:0 |
| Description | A combination of rising interest rates and legislative changes to the student loan program will alter the student loan landscape on July 1. Rates on existing Stafford loans -- the bedrock government-guaranteed student loans that 44 percent of full-time undergraduates rely on to pay tuition bills -- change annually and are pegged to 91-day Treasury bills. For the second year in a row, T-bill rates have jumped nearly two percentage points, taking Stafford loan rates along with them. Last June, rates on Stafford loans in repayment stood at 3.37 percent. On July 1, they will top 7 percent.
There's more: Under legislation Congress approved in 2002, rates on all new Stafford loans issued after July 1 will carry a higher, fixed interest rate of 6.8 percent. (Rates on older loans will continue to float.)
When Stafford loans are not enough, some 800,000 parents each year take out government-sponsored Parent Loan for Undergraduate Students, or PLUS loans, which can cover up to the full cost of college. Rates on those loans are also pegged to Treasury bill rates and will experience similar increases, to 7.94 percent from 6.1 percent on existing loans. New PLUS loans will have a fixed rate of 8.5 percent for most borrowers. |
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