Stafford Student Loan Rates Drop Significantly

Finally, there’s some good news on the student loan front. On July 1, 2008, the interest rates on variable federal Stafford and PLUS Loans will decrease significantly. These new rates apply only to loans issued on or after July 1, 1998 and before July 1, 2006.

The interest rate on Stafford Loans in repayment status will decrease to 4.21% from 7.22%. The interest rate on in-school, grace, or deferment status Stafford Loans will decrease to 3.61% from 6.62%. And, the interest rate on PLUS Loans will decrease to 5.01% from 8.02%. These rates will be in effect through June 30, 2009. The Department of Education sets the rates once each year based on the last three-month Treasury bill auction held in May.

For all Stafford and PLUS Loans issued on or after July 1, 2006, the loans will have a fixed interest rate–6.8% for Stafford Loans and 8.5% for PLUS Loans. However, in coming years, the interest rate on subsidized (but not unsubsidized) Stafford Loans will be reduced to:

• 6.0% for loans first disbursed on or after July 1, 2008 and before July 1, 2009
• 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

Read the disclosure.

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