Legislation Affecting Student Loan Interest Rates

The House of Representatives is voting on a bill today (January 17, 2007) that will mean changes in the student loan industry. This bill will reduce the interest rates on new federal student loans from the current 6.8% to 3.4% over a five year period.

? the rate will be 6.12% for loans first disbursed on or after July 1, 2007 and before July 1, 2008;
? the rate will be 5.44% for loans first disbursed on or after July 1, 2008 and before July 1, 2009;
? the rate will be 4.76% for loans first disbursed on or after July 1, 2009 and before July 1, 2010;
? the rate will be 4.08% for loans first disbursed on or after July 1, 2010 and before July 1, 2011; and
? the rate will be 3.40% for loans first disbursed on or after July 1, 2011 and before January 1, 2012.
After July 1, 2012 the rate would go back to 6.8% This rate reduction is only for loans not yet disbursed, it does not affect the interest rates on any loans you already have.

This program is estimated to cost $7 billion, most of which would be paid by reducing the amount of money the lenders make on the loans. The bill is expected to pass the House today fairly easily but still has to pass the Senate and the President before it becomes law. It may not make it through all the way intact but it is opening the gates to lower interest rates. Stay tuned for the latest updates.