Federally funded student loan interest rates dropped to a record low earlier this summer, overcoming last year’s all-time low.
In effect until next July, the Stafford loan rates, given to traditional undergraduate students, dropped from 4.06 to 3.42 percent on loans borrowed after July 1, 1998. The PLUS loans, given to undergraduate students who are parents, dropped from 4.95 to 4.22 percent.
The rates are re-adjusted each year on July 1, and are calculated after the results of a 91-day U.S. Treasury Bill auction is announced two months prior. Over the past three years, the loan interest rates have dropped more than 4 percent, according to Sallie Mae, a national provider of education funding.
While tuition rates are rising and fees are being added at most
institutions, Jim Parks, president and CEO of Louisiana Education Loan
Authority, said the record-low loan interest rates comes as a “breath of
fresh air” for students, and should lessen the financial burden of students across the nation.
“This is great news and a great time for the students,” said Parks, leader of the state’s student financial aid firm. “Not only do they have lower interest rates, but the rates are tax deductible, so that reduces their payments significantly and helps them save money.”
Freshman Christie Carter from Baton Rouge was thrilled when she learned of the record-low interest rates. She recently received a Stafford federal loan.
“Now I can focus on getting an education and not worry about money so much,” she said. “The percentages are small and it doesn’t seem like whole lot, but over time, me and my family will be able to save a lot of money.”
At the new rate, students who borrow a $10,000 federal loan would save more than $400 over a 10-year period than the previous interest rate.
Students in school, on a 6-month grace period or on deferment only have to pay 2.82 percent until graduation and 3.42 percent during repayment, according to Sallie Mae.
Parks said students with existing loans do not have to refinance them to receive the new interest rate since each loan is automatically adjusted to current rates.
In addition to the federal low interest rates, LELA was able to distribute more than 15,000 student loans this fall in Louisiana with interest rates as low as 0.17 percent through their SuperTop Lender Program. The program, financed by the Louisiana Public Facilities Authority with bonds that are tax exempt, dropped from last year’s 0.81-percentage rate, Parks said.
Students taking out a $10,000 loan through the SuperTop Lender Program will save more than $2,000 over a 10-year-period at the current rate.
Available to all Louisiana residents whether attending college in or out-of-state, the program allows students to receive discounts with waivers of initial fees and rebates — separating them from the federal loans.
“The program is great for students in the state,” Parks said. “But unless students pay on time, they won’t save much because of penalties. The trick is to be prompt with payments to gain all benefits.”
Both Sallie Mae and Parks encourage students to consolidate loans, so they can pay one interest rate on the average of all loans received, instead of paying separate rates.
“Consolidation will allow students to save more money over a longer period of time,” Parks said. “And the rates will be locked to those loans until their life is up.”
Parks said students loans are a great program, but he encourages students to apply for scholarships and grants first if they are able.
“Even with the new rates, students still owe money,” he said. “There are free dollars available from many places. If a student can access the free money, they won’t have to worry about loans at all.”
Parks expects the interest rates to remain low for many years to come.
For more information on student loans rates or to gain access to resources, visit http://salliemae.com.