interest rate on Stafford Loans

[birdie]

What's the interest rate on unsubsidized Stafford Loans? I got 5K sub and 5K unsub from my school, but I dunno how much interest there is on the unsub. Is it a standard amount or does it vary from person to person?

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[Brewster]

Stafford loan interest rates are based on the 91-day T-bill. The rate is calculated as T-bill+1.7% for in school/grace/deferment and T-bill+2.3% for forbearance/repayment.

Last year (academic year 2002-2003), the interest rates were 3.46 and 4.06 respectively. Today's T-bill auction placed the 91-day T-bill at 1.121%. Last year it was this rate (T-bill at the end of May) that was used to determine the Stafford rate. If this is done again this year, the Stafford rates will be 2.82% and 3.42%. However, as far as I know the official announcement has not been made yet.

Stafford interest rates change every year (announced about this time, taking effect July 1). You can lock in rates after graduation by consolidating. No matter what happens, the Stafford Loan interest rate is capped at 8.25%.

 

[Jim Picotte]

Yep today's rate is the official one. Only found one news article so far but I'm sure there will be more to come.

http://moneycentral.msn.com/content/CollegeandFamily/Cutcollegecosts/P36839.asp

 

[birdie]

Originally posted by Brewster
If this is done again this year, the Stafford rates will be 2.82% and 3.42%. However, as far as I know the official announcement has not been made yet.

Excuse my lack of knowledge, but what determines who gets it at 2.82% vs. 3.42%?

 

[jon_jon]

If you are still in school or in grace period, you get the lower rate.

During repayment, you get the higher rate.

 

[Brewster]

Originally posted by birdie
Excuse my lack of knowledge, but what determines who gets it at 2.82% vs. 3.42%?

Sorry for the confusion. I realize now that the way I wrote it was not clear.

The interest rate goes up by 0.6% when you enter forbearance or repayment. If you are in school/in grace period/in deferment, then you have the lower rate.

To clarify terms:
Grace period - Everyone gets a 6 month grace period after graduation during which only the unsub portion accrues interest and the interest rate is lower.

Deferment - You have to qualify. It is based on your income and your debt load. It works like grace period as far as interest goes. It can last up to three years.

Forbearance - Automatically qualify for the duration of residency. Interest accrues at the higher rate and both sub ans unsub portions accrue interest.

Repayment - Self-explanatory.

 

[birdie]

On a side note, are the interest rates for Perkins loans the same? Why are Stafford more popular than Perkins?

 

[Brewster]

Originally posted by birdie
On a side note, are the interest rates for Perkins loans the same? Why are Stafford more popular than Perkins?

My understanding is that Perkins loans are fixed at 5% (used to be a deal since it is only recently that the Stafford rates have dipped below 5%). Perkins loans are not available to everyone...they are more need based than the Stafford loans.

I have to admit a certain amount of ignorance regarding Perkins loans.

 

[FMLizard]

A lot of this is irrelevant, due to the fact that as of 2006, all Stafford loans will carry a 6.8% fixed rate. This sounds crappy right now, but 6.8 was an outstanding rate as recently as 3 years ago. It raises the rates you are paying right now, but lowers the potential maximum rate and eliminates fluctuations. If rates in 2006 or after that are significantly lower, you could always get a private consolidation if you want.

I can dig up sources if anybody wants; I have read this in several places.

 

[Brewster]

Originally posted by FMLizard
A lot of this is irrelevant, due to the fact that as of 2006, all Stafford loans will carry a 6.8% fixed rate. This sounds crappy right now, but 6.8 was an outstanding rate as recently as 3 years ago. It raises the rates you are paying right now, but lowers the potential maximum rate and eliminates fluctuations. If rates in 2006 or after that are significantly lower, you could always get a private consolidation if you want.

I can dig up sources if anybody wants; I have read this in several places.

I would be interested in seeing a reference for this. Not that it matters to me (I graduated and will be consolidating at these low rates), but I am curious nonetheless.

Thanks.

 

[DrQuinn]

Hey Brew...

you obviously know your stuff. Lemme ask you your opinion...

I have about 130k unsub Stafford, with 30k sub Stafford...

If I consolidate the unsub during the grace period, (leave the subsidized alone), will I get the 2% rate, or the 3.4% rate?

And once I consolidate the unsub, can I use economic hardship on both the sub and unsub?

Thanks in advance, bro. Man you rock.

Q, DO

 

[Brewster]

Originally posted by QuinnNSU
Hey Brew...

you obviously know your stuff. Lemme ask you your opinion...

I have about 130k unsub Stafford, with 30k sub Stafford...

If I consolidate the unsub during the grace period, (leave the subsidized alone), will I get the 2% rate, or the 3.4% rate?

And once I consolidate the unsub, can I use economic hardship on both the sub and unsub?

Thanks in advance, bro. Man you rock.

Q, DO

It is my understanding that when you consolidate, you do so at whatever rate you are currently paying. So, if you consolidate during your grace period, when you are paying the 2.8%, then that is the rate your consolidated loan will have. However, if you wait until forbearance/repayment then you will be stuck with 3.4%.

I believe that all (or at least most) federal education loans go into the economic hardship calculation, including sub/unsub Stafford and consolidated loans.

Hope this helps.

 

[DrQuinn]

Thanks Brew, you're a big help.

What are you doing for residency? (I'm EM).

Q, DO

 

[mpp]

Originally posted by Brewster
I would be interested in seeing a reference for this. Not that it matters to me (I graduated and will be consolidating at these low rates), but I am curious nonetheless.

Thanks.

Here is one from the AMA.

 

[Brewster]

Originally posted by mpp
Here is one from the AMA.

Interesting. I had not heard this before. Thanks for the link.

Makes me glad I have graduated.

 

[DrQuinn]

Holy Moley!

Agreed with Brewster, glad I'm done. Feel sorry for all the pre-meds on this site...

Ouchie!

Q, DO

 

[Chimera]

In regards to the staffords becoming fixed in 2006, does this mean that if one consolidated at today's rates using the federal consolidation program that the weighted avg. of the loan would go up as well or that the government will no longer subsidize interest if in deferment? Or are we just grandfathered in, and all future staffords opened after 2006 will be fixed?

 

[XCanadianRagwee]

Read in the paper that interest rates are going down to their lowest rates EVER!!! Might want to check it out....

 

[birdie]

Originally posted by XCanadianRagwee
Read in the paper that interest rates are going down to their lowest rates EVER!!! Might want to check it out....

But that probably won't affect the fact that Stafford interest rates will be going up in 2006. Man I'll be aged by the time I pay back my loans.