Student Loan Rates Plunge To New Lows

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While short-term rates were rising last week, the interest rates on guaranteed student loans, which are tied to the three-month Treasury bill, were falling to their lowest ever.

The rate on the Federal Stafford Loans issued on or after July 1, 1998 automatically reset to 2.77% from 3.37%, the rate for the last year. The rate on Federal Parent Loans for Undergraduate Students (PLUS) issued on or after July 1, 1998 also dipped to a new low of just 4.17%.

These rates, which have declined by almost 500 bps (5%) over the past four years, will be in effect from July 1 through June 30, 2005. Interest rates on these guaranteed loans are variable and reset annually on July 1 based on the 91-day Treasury bill yield, plus a margin of interest set by federal regulation.

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