Changes in Store for Student Loan Programs

By Stephen Borkowski

March 05, 2007

Recent changes on popular student loan programs will affect recent college graduates, incoming college freshman and parents too.

Interest Rates Up

As of July 1, new Stafford loans carry a fixed interest rate of 6.8 percent for the life of the loan. Previously, Stafford loans had a variable interest rate that was adjusted every July and a lower interest rate while the borrower was in school or in the grace period.

Loans disbursed before June 30, 2006 still have variable interest rates. On July 1, those rates rose by 1.84 percent. The interest rate for Stafford loans with in-school or grace period status moved up from 4.7 percent to 6.54 percent. The interest rate for Stafford loans that are in repayment rose from 5.3 percent to 7.14 percent.


As of July 1, 2006, only borrowers who are out of school are permitted to consolidate their loans.

PLUS Loans

Parent Loans for Undergraduate Students (PLUS loans) had their interest rate rise from 6.1 percent to 7.94 percent on July 1


As of July 1, the interest rate for new PLUS loans was fixed at 8.5 percent for the life of the loan.

Graduate and professional students will now have the option of taking out PLUS loans.

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