Federal Stafford Loan Interest Rate

Federal Stafford loan interest rates are determined by the US Dept. of Education. For subsidized Stafford loans, the government pays the interest while you are in school. A portion of your loan may be unsubsidized which means the interest will accumulate while you are in school and you will have to pay it off after you graduate. You always have the option of making payments while you are in school - but most people defer interest payments.

Current Stafford Loan Interest Rates

Direct Subsidized Loans:

• Undergraduate students: The interest rate on subsidized loans first disbursed to undergraduate students between July 1, 2012 and June 30, 2013 is fixed at 3.4%.
• Graduate and professional degree students: Unfortunately, Subsidized Stafford Loans are not available to graduate students for the 2012-2013 year.

Direct Unsubsidized Loans: The interest rate is fixed at 6.8% for all borrowers (undergraduate and graduate).

If you qualify under the Servicemembers Civil Relief Act, the interest rate on loans you obtained before entering military service may be capped at 6% during your service. You must contact your loan servicer to request this benefit.

Stafford Loan Interest Rate History: 1992—2013

The Stafford Loan rates have consistently changed every year with a high of 8.25% from 1995 to 1998, and a low of 3.37% during the 2004/2005 fiscal year.

Variable interest rates were available for Stafford Loans until 2006, when fixed interest rates were introduced. The variable rate adjusts based on the strength of the economy and the prime and LIBOR rates. In order to protect the borrower from extreme financial responsibility, there is a limit to how high the variable rate can go. These rates may rise or fall during the lifespan of a loan.

During 2006-2007, the fixed-rate option was introduced to allow borrowers to avoid the potential heightening of a variable rate. Fixed rates remain the same regardless of economic factors.

The following are the Stafford Loan rates and major legislation changes attributed with the loan since 1992:

Effects of a 2012 Stafford Loan Rate Increase: What Would Have Happened?

In 2007, the College Cost Reduction and Access Act temporarily and gradually lowered rates over the next 3 years to reduce the cost of education during the recession. While most politicians believe the reduction should be extended, there has been trouble finding the $6 billion required to fund it. However, Congress was able to pass the bill, ensuring the 3.4% interest rate remain intact for the 2012—2013 year.

So, what does this mean for current students? Well, if the rate had doubled as intended, the effect on an average borrower would have been around $761 per year. See the example below:

• Average Annual Subsidized Borrowing: $3,357
• At a 3.4% rate the interest paid over a 10-year repayment period would be $675
• At a 6.8% rate the interest paid over a 10-year repayment period would be $1,436
• Results in an additional $761 in interest for one year of borrowing

Doesn't seem like much? It's important to note that subsidized Stafford Loans are for students with more need - 70% of students who hold one come from a family whose income is less than $50,000. In addition to that, the Pell Grant (designed for students with the highest need) has recently lost much of it's funding. The combined effect here would have been much more debt and less higher education for the neediest students.

Other than interest, is there a charge for the Stafford loan?

There is a loan fee on all Direct Subsidized and Unsubsidized Loans. The loan fee is a percentage of the amount of each loan you receive. For loans first disbursed after July 1, 2010 the loan fee is 1.0%. We will deduct the loan fee proportionately from each loan disbursement. The specific loan fee that you are charged will be reflected in a disclosure statement that we send to you.

Prior Federal Loans and Financial Aid History: If you currently have a Stafford Loan and would like to check the interest rate, servicer information, and other financial aid history, go to the National Student Loan Data System.