College students and parents in Iowa and across the country can soon take advantage of record-low interest rates, as the U.S. Department of Education announced this week that interest rates on federal education loans will drop to their lowest point ever.
The Stafford loan rate will fall from 4.06 to 3.42 percent effective July 1. The Parent Loan for Undergraduate Students (PLUS Loan) will be reset at a new rate of 4.22 percent. According to Gary Nichols, executive director of the Iowa College Student Aid Commission, the new rates are the lowest since the federal student loan program began in 1965.
The rate will be even lower, 2.82 percent, for students still in school, as well as those in the six-month grace period that follows graduation or in authorized periods of deferment.
Under a 10-year standard repayment plan, borrowers with $10,000 in student loan debt can save nearly $362 in interest over the life of the loan. Iowa students save even more, Nichols said, with the Commission's waiver of a one-percent guarantee fee and with rate reductions offered by Iowa lenders for borrowers who make auto debit or on-time payments.
Rate reductions offered by the Commission's participating lenders can further reduce interest rates on student loans to as low as 1.875 percent.
Nichols said the added benefit of tax-deductibility on student loan interest effectively drops the interest to a tax-adjusted rate of 1.3 percent.
As the state's designated guarantor for the Federal Family Education Loan Program, the Iowa College Student Aid Commission makes available more than $280 million annually in student loan funds. In addition, the Commission administers state scholarship and grant programs and other services designed to provide Iowans with access to the higher education opportunities of their choice.
Student loan and financial aid information is available from the Commission's website: www.iowacollegeaid.org.