It's Official: Student Loan Interest Rates to Fall to New Lows on July 1

Interest rates for Stafford loans and Parent Loans for Undergraduate Students (PLUS) will drop to historical low rates of 3.42% and 4.22%, respectively, spelling continued good news for borrowers. Stafford loan rates for students within the six-month grace period or in deferment will drop to 2.82% from last year's 3.46%.

Last year's loan rates of 4.06% for Stafford Loans and 4.86% for PLUS loans also set record lows and triggered a surge in the number of borrowers seeking to consolidate their loans.

The rates for Stafford and PLUS loans are based on the yield for the 91-day Treasury bill that was set on May 28, plus a fixed margin. Treasury bills, or T-bills, are marketable securities the U.S. government sells in order to pay off maturing debt and raise the cash needed to run the federal government.

"Record low loan interest rates may make the difference for many students considering whether to pursue post-secondary education," Education Secretary Rod Paige said in a news release.

The Department of Education announced on May 20 that borrowers who submitted Direct Loan consolidation applications between May 20 and June 30 would be notified by ED's Office of Federal Student Aid (FSA) that their applications were being held until the new rates take effect on July 1, in order to take advantage of the lower rates.

By Elizabeth B. Guerard
NASFAA Assistant Director of Communications

Posted May 29, 2003 on www.NASFAA.org, the Web Site of the
National Association of Student Financial Aid Administrators (NASFAA).
Copyright 2003. Redistribution to non-NASFAA institutions is prohibited
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