Student Loan Interest Rates to Fall to All-Time Lows

Interest rates on federally guaranteed student loans will drop to historic lows again this summer, potentially saving both new and current education loan borrowers thousands of dollars in interest over the life of their loans. These record-low rates will help families and students finance college this fall. "College financing has never been more affordable," said Tom Joyce, Vice President of Corporate Communications for Sallie Mae. "These new rates on federal education loans trump what consumers will find anywhere else."

Federal Stafford Loans issued on or after July 1, 1998 automatically will be reset to an interest rate of 2.77 percent during in-school, grace and deferment periods, and 3.37 percent during repayment. Interest rates on Federal Parent Loans for Undergraduate Students (PLUS) issued on or after July 1, 1998 will drop to a record low of 4.17 percent. These rates, which have fallen nearly five percentage points over the past four years, are in effect from July 1, 2004 through June 30, 2005.

Interest rates on Federal Stafford and PLUS Loans are variable and reset annually on July 1 based on the 91-day Treasury bill yield from the last auction in May, plus a margin of interest set by federal regulation. The U.S. Department of Education is expected to confirm the new rates – calculated based on yesterday's auction -- later this week. For loans issued after July 1, 1998, Stafford Loans are capped at 8.25 percent and PLUS Loans may not exceed 9.00 percent.

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