Federal Interest Rates for College Loans:
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A section of this law (201) cuts interest rates on one type of loan. If you take out an undergraduate subsidized Stafford loan, you will benefit by these new rates:
| Date Dispersed | Interest Rate |
| July 1, 2008- July 1, 2009 | 6.0% |
| July 1, 2009- July 1, 2010 | 5.6% |
| July 1, 2010- July 1, 2011 | 4.5% |
| July 1, 2011- July 1, 2012 | 3.4% |
Remember, these reductions are only for subsidized (government pays the interest while you are in school) Stafford loans.
A graduate Stafford loan (whether subsidized or unsubsidized) has a fixed rate of 6.8%.
An unsubsidized undergraduate Stafford loan also has a fixed rate of 6.8%.
The rate for a Perkins loan is a fixed 5.0%.
Parent college loans are called PLUS loans. You can get them either through the Federal Family Education Loan (FFEL) Program or through the William D. Ford Federal Direct Loan (Direct Loan) Program. Rates for these loans are:
- 8.5% for a FFEL PLUS loan
- 7.9% for a Direct PLUS loan
If you are wondering how these rates compare to past ones, check out this graph:
Student Loan Interest Rates
* 2008-9 Stafford rates are for fixed, subsidized loans
* 2006-9 Plus rates are for fixed FFELP loans
Although PLUS rates have historically been higher than Stafford rates, you can see that the gap has grown larger with the passage of the latest college loan legislation.
Federal interest rates for college loans have always been something of a political football. However, for the foreseeable future there won't be any drastic difference in the rates. SAFRA, the major higher education legislation in Congress now, does not include interest rate changes.
Lowering federal interest rates makes life after college more affordable, but it does not guarantee that students can afford the tuition at the schools they want to attend.
To make sense, any decrease in rates should be accompanied by raising the limits of how much students can borrow. If repayment terms stay easy, fewer defaults will occur, and that's got to be good for everyone.
Bottom line: As a student consumer, be grateful for lower federal interest rates for subsidized loans. As a parent, the deal is not as good, but if you do not have sterling credit and collateral, a plus loan is an easy option.
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