Answers to Your Questions on Student Loan Interest

A college degree is a vital part of helping students have a successful future and a place in the middle class, and making college affordable is a major priority for the Obama Administration.

Federal Aid LogoAs of July 1, 2013, the interest rate on new subsidized Stafford Loans rose to 6.8% from the previous rate of 3.4%. Our Administration is actively working with Congress to bring rates back down for new loans. In addition, the Administration has advocated that any plan passed by Congress apply to all loans first disbursed after June 30, even loans already disbursed.

If the law is changed, the Department and its servicers will adjust rates for all affected borrowers, including those who had already received their first subsidized loan disbursement, without any further action on the part of the borrower or the school.

We know some borrowers and families may have some questions about what the rate change means and we’ve answered some of the most common questions below. If you do have specific questions about your loan please visit http://studentaid.ed.gov/ or contact 1-800-4-FED-AID for more information.

Q: Should I still apply for federal student aid given the interest rate hike?

A: Students and families who wish to obtain financial aid should complete should complete a 2013-2014 FAFSA if they have not already done so. Schools should continue to award and process Direct Subsidized Loans with estimated disbursement dates. The Administration is working with Congress to bring rates back down for new loans.

Q: What is the current rate of federal subsidized loan?

A: Absent further Congressional action, the interest rate for all Direct Subsidized Loans with a first disbursement date on or after July 1, 2013, is 6.8%. This is the same interest rate that applies to Direct Unsubsidized Loans.

Q: Is the 6.8% rate permanent for the lifetime of my loan?

A: The Obama Administration continues to work with Congress to reach agreement on a plan to reverse the doubling of those interest rates.  Further, the Administration has urged that any plan passed by Congress apply to all loans first disbursed after June 30, even loans already disbursed. If the law is changed, the Department and its servicers will adjust rates for all affected borrowers, including those who had already received their first subsidized loan disbursement, without any further action on the part of the borrower or the school.

What if I already have a loan? Does the interest rate change?

A: No change in interest rates on a loan where the first disbursement was before July 1, 2013

15 Comments

  1. I have been paying on a student loan for several years. I could now pay it off. Will that save me future interest charges or will the interest for the life of the loan be a part of the balance to be paid?

  2. I completed a FAFSA just last Thursday and then went to the University of Phoenix for the loan counseling. Over the weekend we had a family emergency and I have decided not to attend the program. I have not started classes yet; will I still be responsible for paying back any money? Let me know and thanks!

    • Thanks Lisa for the question. You will want to contact your school regarding their policies for these types of situations. For more information on the policies and procedures from the Office of Federal Student Aid, please visit their information center at https://studentaid.ed.gov/contact.

      Cameron Brenchley
      Office of Communications and Outreach

  3. if you have questions on your student loans & the intrests rates before the change. contact your lenders they should be able to anseer your questions. if paymets are too high they can go over different repayment options with you.

  4. I have a similar issue. My loans are respectively at 6.8% and 5.6% already. Why do they say that these rates were at 3.4%?
    Mine are loans that are these types beimg Stafford ones and some have been out since 2007.

    • Seriously, and folks wonder why students don’t graduate in four years from college? The rank and file RUN OUT OF FUNDS!!!

    • The interest rates are based on the disbursement date you received the loans. the interest rate of 3.4% for subsidized stafford loans were not always at that rate. Check studentaid.ed.gov for more info on the interest rates (Also, check with your servicer as they have the full info on your disbursement info)

  5. Why does the Congress authorize student loan rates that are 20 times (and more) higher than the rate at which Wall Street banks can borrow federal funds? Seems to me the CEOs and other executives at their outrageous salaries can lend the banks the money. America must encourage more education among its citizens to dig ourselves out of the hole we have placed ourselves in–way behind many other countries in education. How can I act to make these interest rates change — .25% for students and 3.4% (or 6.8%) for banks?

    • I couldn’t agree more! Thank you for putting it in my words! They hurt the most vulnerable because they cannot defend themselves! It’s like grownups abusing kids!

  6. Is this applicable to only Subsidized Stafford loans or does it apply to Unsubsidized Stafford loans as well?

    Randy

  7. Most of my FedLoan consolidated loans have carried an interest greater than 6.55% for years. I don’t understand how the 3.4% to 6.8% language applies exactly? Very few of my loans within my consolidated FedLoan are 1.8% so again I find it all very confusing. Was I supposed to be paying 3.4% on all loans for years, or what exactly is this one issue when there are so many different rates even within a consolidated loan; FedLoan consolidated 100% of my loans, yet they carry different interest rates for some reason? Am I overpaying some and underpaying others?

    • I have the same situation. Some of my loans are 2.4% and the rest are and have been at 6.8%. I don’t understand the significant differences. My loans are so expensive and I’m not making any progress on the principal.

    • You’ve been getting screwed for years Lowell
      The government loans money to Banks
      at an interest rate of 3/4 of a %.

Comments are closed.