Advertisement - Members don't see this ad
Rates on college loans to rise by record amount
6/1/2005
NEW YORK (AP) - Interest rates on federally backed loans for college students are set to jump by a record amount on July 1, the Department of Education said Tuesday.
Based on the results of a Treasury bill auction, the in-school rate on the federal Stafford loan will rise by 1.93 percentage points to 4.7 percent.
The rate for loans in repayment will rise by the same percentage to 5.3 percent, while the PLUS loan rate for parents will rise to 6.1 percent.
The rates are based on the three-month Treasury bill auctioned Tuesday.
The Treasury Department auctioned $17 billion in three-month bills at a discount rate of 2.935 percent, up from 2.895 percent last week. Another $15 billion in six-month bills was auctioned at a discount rate of 3.080 percent, down from 3.110 percent last week.
The new discount rates understate the actual return to investors - 2.998 percent for three-month bills with a $10,000 bill selling for $9,925.81, and 3.172 percent for a six-month bill selling for $9,844.29.
In a separate report, the Federal Reserve said Tuesday that the average yield for one-year Treasury bills, the most popular index for making changes in adjustable rate mortgages, was unchanged at 3.32 percent last week, the same as the previous week.
Students can still consolidate their loans at rates as low as 3.375 percent until July 1. For the first time, it is also possible to consolidate bank-based Stafford loans while still in school, by putting them in repayment status, then asking to defer payments until graduation.
A graduating student with $20,500 in loans, the average for borrowers last year, will save $2,842 over the course of a 10-year repayment by consolidating before the new rates go into effect, according to the College Loan Corp., a San Diego-based lender.
6/1/2005
NEW YORK (AP) - Interest rates on federally backed loans for college students are set to jump by a record amount on July 1, the Department of Education said Tuesday.
Based on the results of a Treasury bill auction, the in-school rate on the federal Stafford loan will rise by 1.93 percentage points to 4.7 percent.
The rate for loans in repayment will rise by the same percentage to 5.3 percent, while the PLUS loan rate for parents will rise to 6.1 percent.
The rates are based on the three-month Treasury bill auctioned Tuesday.
The Treasury Department auctioned $17 billion in three-month bills at a discount rate of 2.935 percent, up from 2.895 percent last week. Another $15 billion in six-month bills was auctioned at a discount rate of 3.080 percent, down from 3.110 percent last week.
The new discount rates understate the actual return to investors - 2.998 percent for three-month bills with a $10,000 bill selling for $9,925.81, and 3.172 percent for a six-month bill selling for $9,844.29.
In a separate report, the Federal Reserve said Tuesday that the average yield for one-year Treasury bills, the most popular index for making changes in adjustable rate mortgages, was unchanged at 3.32 percent last week, the same as the previous week.
Students can still consolidate their loans at rates as low as 3.375 percent until July 1. For the first time, it is also possible to consolidate bank-based Stafford loans while still in school, by putting them in repayment status, then asking to defer payments until graduation.
A graduating student with $20,500 in loans, the average for borrowers last year, will save $2,842 over the course of a 10-year repayment by consolidating before the new rates go into effect, according to the College Loan Corp., a San Diego-based lender.
