Immediate College Loans Information
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There are three types of federal student loans. The rate of interest and use of these loans has risen dramatically over the last few years. The various federal loan programs available are:
Stafford Loan
Perkins Loan
PLUS loan
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Federal Consolidated Loan
Federal student loan interest rates vary according to both the type of loan and the year. So depending on the loan, and the year which the loan was first initiated, the amount of student loan interest owed can change considerably over the life of the loan. This can affect student loan debt. This article will take a look at the two most common, Stafford and PLUS loans as well as Federal Consolidated Loans.
Stafford Loans
Depending on the year of the federal student loan, the interest rate will vary.
Loans first disbursed from July 1, 2008 onward have a yearly declining interest rate from 6% to 3.4% by 2012
As of July 1, 2012 the rate is 6.8%
As of July 1, 2006 the rate was fixed at 6.8%
The rate between July 1,1998 and June 30, 2006 is variable but will not exceed 8.25%
The rates are based upon the 91-day T-bill rate plus a certain percentage during repayment periods.
PLUS Loan
The interest rate on this federal student loan is more stable.
The rate on loans from July 1, 1998 up to June 30, 2006 is variable but will not exceed 9%. As of July 2008 it was 5.01%
The rate on loans after July 1, 2006 is fixed at 8.5%
These loans mostly effect parents of students since the loan is based upon their credit and their ability to repay the loan.
Consolidated Student Loans
Because of Congressional cuts and the credit downturn of 2008 many lenders, including Sallie Mae, have stopped participation in the federal consolidation loan program. This has not affected the rate of interest in federal student loan consolidation.
The fixed interest rates for federal consolidation loans varies for each individual. The general range is from 4.75% to 6.125%. The factors that set the interest rate of the federal student loan consolidation are:
The borrower’s underlying loans’ primary interest rate
Does not include discounts for interest reduction benefits
Certain rules apply for consolidation loans.
Different interest rates apply to federal student loans and consolidated loans prior to July 1, 1998 so you will need to check on that information. Most of this information is on the federal student aid website.
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