Federal Updates

Variable interest rates jump again for 2006-07

ED has announced the new variable interest rates that will take effect July 1, 2006, on Stafford and PLUS loans that are subject to the variable-rate provision.

Loans disbursed prior to July 1, 2006

On July 1, 2006, interest rates on Federal Stafford and PLUS loans that are subject to the variable-rate provision and were first disbursed on or after July 1, 1998, but before July 1, 2006, will be as follows:

• 6.54 percent for Federal Stafford loans during in-school, grace, and deferment periods.
• 7.14 percent for Federal Stafford loans during repayment and forbearance periods.
• 7.94 percent for Federal PLUS loans.

Thus, just as the financial aid industry surmised would happen, variable interest rates have now risen to relatively the same level as the soon-to-be fixed interest rates of new Stafford and PLUS loans, as described below.

Loans disbursed on or after July 1, 2006

More rates to come
Some older PLUS and SLS loans have variable interest rates based on the weekly average of the one-year constant maturity U.S. Treasury yield for the last calendar week ending on or before June 26. As a result, new rates on such loans won't be available until late June.

Another interest rate not expected until late June is the one applicable to the HEAL portion of Federal Consolidation loans, which is based on the average of the bond equivalent rates of the 91-day T-bills auctioned for the quarter ending June 30.

More information
ED's press release on the new variable interest rates is available online at http://ifap.ed.gov/eannouncements/0531InterestRate20062007.html. To access TG's updated annual interest rate chart for applicable interest rates, visit www.tgslc.org/pdf/int_rate_0607.pdf.

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