Educational loan interest rates hit an all-time low

By Josh Abner

Students looking to take out federal loans for college will now benefit from lowest interest rates ever this year, according to the Kentucky Higher Education Assistance Authority (KHEAA). KHEAA helps students throughout the state by administering grant, scholarship, work-study, savings and other programs to help students pay for college or technical training.

“The interest rate on the Federal Stafford Loans made this year dropped to 5.39 percent on July 1,” said Londa Lewis Wolanin, KHEAA’s Chief Operating Officer. “That’s down from 7.59 percent borrowers paid during the 2000-2001 fiscal year. In fact, it’s the lowest rate ever. The interest rate when the student loan program begain in 1965 was 7 percent.”

Borrowers already repaying student loans will also see interest rates drop from 8.19 last year to 5.99 this year. Student loan interest rates are set annually, based on the auction rates of 91-day Treasury bills. Multiple lowerings of interest rates by the Federal Reserve Board this year is the reason student loan rates have fallen to all-time lows. The July 1 student loan rates will be effective for 12 months.

Freshman political science major Rick Curtsinger took out a Federal Stafford Loan and will receive the new lower rate. “Lower interest rates mean lower payback. That’s less I have to worry about.”

The U.S. Department of Education estimates that students repaying loans under the standard 10-year repayment plan will save about $136 for each $1,000 they owe.KHEAA guarantees approximately $60 million annually for U of L students, according to Wolanin. U of L has the largest annual volume of Federal Family Education Loans guaranteed by KHEAA of any Kentucky school.

Interest on Federal PLUS Loans, which are made to parents to help pay for the child’s education will also be lowered from 8.99 percent to 6.79 percent.

The new rates do not apply to loans disbursed before July 1, 1998. Borrowers looking to take advantage of the new rate could benefit by getting a Federal Consolidation Loan. More information about Federal Consolidation Loans, as well as other information regarding student financial aid can be found at KHEAA’s Web site.