Paying for College

Student Loan Rates Low

If you have been looking for a silver lining in these troubled economic waters, you may find it in student loan interest rates. Students who need extra funding for college can take advantage of changes in the law and improvements in the economy which mean student loans at among the best interest rates in the last five-year period. For the 2011-12 academic year, interest rates on new need-based federal Stafford student loans will drop by more than 20 percent.

“The good news for college students is that interest rates on several kinds of student loans are among the lowest in recent history," says Joe DePaulo, executive vice president, Sallie Mae. “Our 'How America Pays for College' national study confirms that students and parents alike value the investment in a college education and are willing to stretch themselves financially in order to make it happen."

While deadlines for many scholarships for the 2011-12 academic year have passed, there are some tools out there that can help you locating resources. One such tool is Sallie Mae's free scholarships database, which can help students identify any last-minute aid opportunities. In addition, it's not too late to complete the FAFSA or Free Application for Federal Student Aid to check eligibility for federal grants. Here's some additional information about interest rates:

For the 2011-12 academic year, interest rates on new need-based federal Stafford student loans will drop by more than 20 percent, from 4.5 percent to 3.4 percent, fixed. Rates on non-need-based federal Stafford loans or graduate Stafford loans remain at 6.8 percent, and PLUS loans remain at 7.9 percent, both loan types with rates fixed for the life of the loan. Most students awarded subsidized loans come from families with annual incomes under $50,000, though some with higher incomes can qualify due to family size or other factors. Dependent undergraduate students can borrow a maximum in subsidized federal Stafford loans of $3,500 for freshmen, $4,500 for sophomores, and $5,500 for juniors and seniors.

From the Web site:

The interest rates on Federal education loans change on July 1, and are based on the 91-day rate from the last Treasury auction in May and the average one-year constant maturity Treasury yield (CMT) for the last calendar week ending on or before June 26th. The following rates are updated automatically by a program that retrieves the latest appropriate Treasury bill auction data from the US Treasury web site. (During the month of June, the rates may reflect the updated reference rates. Check the date of the 91-day T-Bill and CMT reference rates listed below to see whether the student loan rates refer to the old or new academic year.)

Please note that the College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly originated subsidized Stafford loans for undergraduate students to 6.0% (2008-09), 5.6% (2009-10), 4.5% (2010-11) and 3.4% (2011-12), with a return to 6.8% in 2012-13. These cuts are available only to undergraduate students, not graduate students, and only for subsidized Stafford loans, not unsubsidized Stafford loans. Those loans remain at a fixed rate of 6.8% ...

So, there's some brighter news out there amid the darker headlines, if you're willing to look for it. Student loan shopping is not unlike shopping for deals on other consumer goods. Bottom line: Compare before you commit.


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