Thursday, July 29, 2010

GOOD NEWS: Student Loan Interest Rates Have Fallen - a little!

If you have variable interest rate student loans, you are probably already used to looking forward to July 1st each year – the day you rate will either go up or, hopefully, down. However, even students who are signing up for a fixed rate loan can look forward to the date!

Let’s look at the older loans first. If your student loans were issued between July 1, 1998 and June 30, 2006, as of July 1, 2010, your student loan’s interest rate has fallen by .01%. Now that does not sound like a big deal, but the current year’s rate is 2.47% for loans in Repayment or Forbearance. If your loans are in Grace, In-school or in another Deferment status, your rate is even lower, down to 1.87%. While the 0.01% decrease may not sound like much, over a standard 10 year repayment term, it represents $ 63.15 for every $10,000 in student loans. If you have $25 K in student loans and consolidate to lock your interest rate in, you will save $157.88 over the next ten years. The true beauty of the 2.47% when compared to 2.48% comes with the practice of rounding of interest to the nearest 1/8th percent. The 2.48% will round to 2.50%, while 2.87% will round to 2.475%. (The same will hold true for the 1.87% grace rate when compared to the old grace rate of 1.88%)

There is also good news for most undergraduate students who are currently taking out student loans. Your subsidized undergraduate Stafford rates will also drop. In fact, if you have been receiving subsidized Stafford student loans since July 1st, 2008, you have been enjoying a rate decrease each year.

  • Subsidized Undergraduate Stafford Loans from 7/1/08–6/30/09 are 6.00%

  • Subsidized Undergraduate Stafford Loans from 7/1/09–6/30/10 are 5.60%

  • Subsidized Undergraduate Stafford Loans from 7/1/10–6/30/11 are 4.50%

  • Subsidized Undergraduate Stafford Loans from 7/1/11- 6/30/12 are 3.40%
Interest rates for unsubsidized undergraduate Stafford and Graduate Stafford loans (both subsidized and unsubsidized) have a fixed rate of 6.8%. I am sorry to close on a bit of bad new; however, as current legislature stands, the subsidized undergraduate Stafford rate will increase to 6.8% beginning 7/1/2012. That should be a bit of motivation to kick your studies in gear and graduate by June 2012!