Interest rates on Federal Stafford loans and Federal PLUS loans are fixed rates that change each July 1 based on the last 10-year Treasury rate auction in May. The current rates for the 2013-2014 award year are 3.86% for undergraduate Federal Stafford loans, 5.41% for graduate Federal Stafford loans and 6.41% for Federal Grad PLUS loans and Federal Parent PLUS loans. These interest rates are scheduled to increase on July 1, 2014 by 0.80%. The new rates for the 2014-2015 award year will be 4.66%, 6.21% and 7.21%, respectively.
This corresponds to an increase in the monthly loan payments on a 10-year term of about $4 for every $10,000 borrowed, or about $46 to $49 a year.
Total costs will increase by $460 to $492 over the 10-year repayment term of the loans.
Unfortunately, there's no way to borrow loans now for the fall based on the current low interest rates. Interest rates are set based on the date the loan is disbursed. Federal education loans cannot be disbursed more than 14 days before the start of the academic year. Also, some colleges are required to delay the disbursement by 30 days for first-time, first-year borrowers. So, unless the academic year starts before July 1 or soon afterward, students are unlikely to be able to borrow early enough to lock in current rates for the fall.
If a current college student has remaining federal loan eligibility for the award year that ends June 30, 2014, he or she could borrow to the limit under the current rates before July 1 and save the money to pay for next year's college costs. But, most students will have already exhausted their eligibility for Federal Stafford loans for this award year.
The interest rates on federal education loans are likely to continue increasing each year over the next several years by 0.75% to 1.50% per year.
After reviewing your financial aid package, you may find that you come up short. In that case, here are some tips to help you compare your options.
· Look at the Annual Percentage Rate (APR). APR includes associated fees and is a better comparison point than interest rate alone.
· Know your fees and limits. Compare origination and application fees, along with any borrowing limits.
· Learn about fixed and variable rates. Federal student loans currently have fixed rates but most private loans now come with the option.
· Find a cosigner with great credit. More than 90% of approved private loan borrowers applied with a cosigner.
· Compare repayment benefits such as payment plans, deferment options, and auto-debit or relationship discounts.
Reprinted Courtesy of Financial Aid News June 2014
This corresponds to an increase in the monthly loan payments on a 10-year term of about $4 for every $10,000 borrowed, or about $46 to $49 a year.
Total costs will increase by $460 to $492 over the 10-year repayment term of the loans.
Unfortunately, there's no way to borrow loans now for the fall based on the current low interest rates. Interest rates are set based on the date the loan is disbursed. Federal education loans cannot be disbursed more than 14 days before the start of the academic year. Also, some colleges are required to delay the disbursement by 30 days for first-time, first-year borrowers. So, unless the academic year starts before July 1 or soon afterward, students are unlikely to be able to borrow early enough to lock in current rates for the fall.
If a current college student has remaining federal loan eligibility for the award year that ends June 30, 2014, he or she could borrow to the limit under the current rates before July 1 and save the money to pay for next year's college costs. But, most students will have already exhausted their eligibility for Federal Stafford loans for this award year.
The interest rates on federal education loans are likely to continue increasing each year over the next several years by 0.75% to 1.50% per year.
After reviewing your financial aid package, you may find that you come up short. In that case, here are some tips to help you compare your options.
· Look at the Annual Percentage Rate (APR). APR includes associated fees and is a better comparison point than interest rate alone.
· Know your fees and limits. Compare origination and application fees, along with any borrowing limits.
· Learn about fixed and variable rates. Federal student loans currently have fixed rates but most private loans now come with the option.
· Find a cosigner with great credit. More than 90% of approved private loan borrowers applied with a cosigner.
· Compare repayment benefits such as payment plans, deferment options, and auto-debit or relationship discounts.
Reprinted Courtesy of Financial Aid News June 2014
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