Federal Loan Interest Rates

Dear Rebecca,

When it comes to education loans, federal loans are usually your best bet. The basic requirements and benefits for federal loans are the same in each state, as set by federal government guidelines. If your children are both dependent undergraduates and enrolled at least half time, then they may be eligible for Stafford Loans. Eligibility for Stafford Loans will vary, but generally dependant undergraduates can borrow a maximum of: $3,500 for first-year students, $4,500 for second-year students, and $5,500 for third-year and fourth-year students enrolled in standard 4-year undergraduate programs. Your children can apply for Stafford Loans and other federal student aid by filling out a Free Application for Federal Student Aid (FAFSA).

As the parent of a dependent undergraduate, you may be eligible to borrow PLUS Loans for your children if you meet the minimum credit criteria. Parents can borrow PLUS Loans for up to the cost of attendance, minus the other financial aid the child receives.

Federal education loans have fixed interest rates that are set by U.S. Congress. Starting July 1, the rates will be 5.6% for subsidized Stafford Loans and 8.5% for PLUS Loans. Since these rates are set by law, they will not vary much between lenders. It may be best for you to choose a lender you prefer based on the individual services they offer. Keep in mind, some lenders may offer bonuses to their customers, like breaks on your interest rate if you register for automatic monthly payment for your loans.

You may want to speak to a financial aid administrator at both of your children’s schools for suggestions about lenders to choose for your loans. Remember to ask the school specifically why they are recommending a particular lender and that a school may not restrict your choice of lender for your education loans.

For more information about types of federal student aid, visit www.amsa.com/bor.

Regards,
Betsy