July 1st, Record-Setting Drop in Student Loan Interest Rates

PHOENIX, AZ - Both new and current student loan borrowers of certain federal Stafford student loans saw two interest-rate drops go into effect yesterday that could save them significant amounts of money on these fixed- and variable-rate student loans. Borrowers with variable-rate Stafford loans saw the biggest rate drop -- three percentage points -- due to the general interest-rate cuts made by the Fed over the past year.

Borrowers holding both subsidized and unsubsidized variable-rate Stafford student loans -- those Stafford loans that were disbursed between July 1, 1998, and June 30, 2006 -- received their record-setting rate reduction when the interest rate on those student loans reset on July 1, as it does every year.

As a result of the rate cuts made by the Fed, borrowers with variable-rate Stafford loans that are in repayment or forbearance saw their interest rate drop from 7.22 percent to 4.21 percent. Borrowers with variable-rate Stafford student loans who are still in school, in their grace period, or in deferment saw the interest rate on their student loans go from 6.62 percent to 3.61 percent.