Project on Student Debt (June 17, 2008)

Each July 1, interest rates and other key terms change for federal student loans. This year, interest rates decrease and borrowers in public service professions can take a major step toward student loan forgiveness.

The following is a summary of what college students, their parents, and people already repaying their student loans need to know about these changes.

Rates Go Down on New Stafford Loans
•  The fixed interest rate for new subsidized Stafford loans drop from 6.8% to 6.00% for
   undergraduates.
•  Origination fees for all Stafford loans drop by half a percentage point, to 2% of the amount
   borrowed.

More Loan Funds Become Available
• Undergraduates can borrow an additional $2,000 each year in unsubsidized Stafford loans at a
   fixed interest rate of 6.8%. The total amount of Stafford loans, including both subsidized and
   unsubsidized, that undergraduates can borrow over their college career is also increasing.

Start the Clock for Public Service Loan Forgiveness
•  Borrowers who have already consolidated their federal loans with a private lender in the FFEL
   program can reconsolidate into the Direct Loan program to become eligible for Public Service
   Loan Forgiveness. This is a new federal program that will forgive remaining federal student
   loan debt after 10 years of qualifying loan payments and eligible full-time employment.

Borrowers with Variable-Rate Loans Can Lock in New Low Rates
• The variable rate for unconsolidated Stafford loans taken out before July 1, 2006 is going down
   to 4.21%.
• For class of 2008 graduates, the news is even better. If they consolidate during their six-month
   grace period, they can lock in an even lower rate, 3.61%.

A complete consumer fact sheet with more details is available at: http://projectonstudentdebt.org/july1-2008.vp.html

The Project on Student Debt works to increase public understanding of this trend and the implications for our families, economy, and society. Recognizing that loans play a critical role in making college possible, the Project's goal is to identify cost-effective solutions that expand educational opportunity, protect family financial security, and advance economic competitiveness.