Stafford loans fall into two categories depending on the
for them. The first type of Stafford loan is one that is subsidized,
meaning that the federal government will not charge any interest
while the student is attending college and before repayment
begins on the loan.
Students who are unable to demonstrate the financial need required
for a subsidized loan must turn to an unsubsidized Stafford
loan. In this case interest will be charged while the student
attending college. The rate of 2.77 percent applies during
the unsubsidized period (while the student is still attending
and it will automatically increase to 3.37 six months after
the student graduates or when repayment by the student begins.
Over the past four years federal student loan rates have become
more student friendly. In July of 2000 the Stafford loan rate
was a whopping 8.19 percent. The next two years saw the rates
go all the way down to 4.06 percent. In July of 2003 the rate
was at 3.42 percent. These rates are affected by changes in
the federal rate which as been going down over the past four
The rate for student loans again dropped in 2004 because of
the weighted average of the fed rate over the last year. Student
loan rates could increase in July of 2005 due to the increase
in the fed rate that is now occurring.
Plus loans have followed the same pattern as Stafford loans
over the past four years. Plus loans have always seen a slightly
interest rate because Plus loans are initially given to the
parents. Plus loans were also at an all-time low rate of 4.17
starting July 1.
The reduced interest rates make this a good time for students
and parents to consider consolidating student debt. The deadline
to do so is June 30, 2005.
Essentially consolidation occurs when one lender buys all of
your loans and turns all of them into one, easy-to-manage loan.
Consolidating may be the right decision for someone who has
many loans. Perhaps the most important reason to consolidate
pay less interest or to reduce monthly payments. According
to Sallie Mae, the nation’s leader in education funding,
consolidation can reduce monthly payments by up to 45 percent.
This is an ideal
situation for anyone planning to graduate within the next year,
or a recent graduate approaching his/her six-month grace period.
Once loans are consolidated, the repayment period will begin.
Students still attending college should not consider consolidation
unless willing to accept the burden of repayment.
To learn more about consolidation for your student loans
check out www.salliemae.com or www.studentaid.ed.gov. Or
Sallie Mae directly at 1-(800)448-3533.