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Categorized | Paying For College

Interest Rates on Stafford Loans Going Up

StaffordloanThe above title is not a misprint. Interest rates on Subsidized Stafford loans are indeed going up. However, they are not going to increase until the academic year of 2012-2013… I would like to take credit for being a fortune teller or having the ability to predict the future but alas the College Cost Reduction and Access Act (CCRAA) of 2007 actually set the interest rates for the Stafford Loan Program years ago.

As established by CCRAA, the Subsidized Stafford loan interest rate for this current academic year is set at 5.6%. Next year (2010-2011) the interest rate is on schedule to drop to 4.5%. The rate will reach its all time low during 2011-2012 when it bottoms out at 3.4%. Then, as the title of this article states, the Subsidized Stafford loan interest rate will jump back up to 6.8%.

So, what does this mean to students that are taking out Stafford loans to fund their educational expenses? As far as I can tell, it really means nothing other than the fact that if you take a Subsidized Stafford loan each of the 4 years that you attend college, you get to experience the fluctuation (highs and lows) of interest rates over those years.

However, if you are the recipient of an unsubsidized Stafford loan (interest accrues while in school), you can take solace in knowing that your interest rate has remained constant at 6.8%. Which really isn’t much comfort given the rate.

The future of the Stafford loan program is uncertain (as is just about any federal aid program for higher education) but it does appear that Congress is looking at a proposal to change the Stafford Loan interest rates from a fixed rate to a variable rate and making 6.8% the maximum percentage rate that will be allowed to be imposed on borrowers. Time (and legislation) will only tell…

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