Skin in The Game: Student Loan Rate Depends on When You Signed Up

NEW YORK (MainStreet)—As Congress tries to prevent a July 1 jump in interest on federal student loans from 3.4% to 6.8%, rate hike hysteria has spread from people who are about to borrow to those who have graduated and are on the job market—yet still have loans at rates above 3.4%. To them, the next freshman class could be about to catch a break. Their question: what about us?

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The unsatisfying answer is that the rate you signed for when you got the loan is the one you'll likely be stuck with until you've paid it off.

"Stafford Loan interest rates are fixed rates for the life of the loan that are specified in the Higher Education Act as amended by the U.S. Congress," said Department of Education spokesperson Jane Glickman.

Glickman provided the following breakdown of fixed interest rates as they are applied to Direct Subsidized and Unsubsidized Loans in the William D. Ford Direct Loan Program and to Federal Stafford Loans in the Federal Family Education Loan (FFEL) Program, since July 1, 2006.


  • July 1, 2006 – June 30, 2008: 6.80 %
  • July 1, 2008-June June 30, 2009: 6.00%
  • July 1, 2009-June 30, 2010: 5.60%
  • July 1, 2011-June 30, 2011: 4.5%
  • July 1, 2011-June 30, 2012: 3.4%
  • July 1, 2012-June 30, 2013: 3.4%

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Because of an amendment to the 2010 Affordable Care Act—the Obama health care legislation--no new loans were authorized to be made in the private lender-based FFEL Program after June 30, 2010.

Mark Kantrowitz, senior vice president and publisher of Edvisors Network, put a finer point on the interest rate environment. "The rates were set by statute, not pegged to any index," such as the prime rate or 10-year Treasuries. "These rates were set by a law enacted in February 2002 at 6.8% (Stafford) and 7.9% (PLUS), except that the Higher Education Reconciliation Act of 2006 modified the PLUS loan interest rate to 8.5% for the FFEL PLUS loan, accidentally leaving the Direct Loan PLUS at 7.9%." PLUS loans are used by graduate students and parents of undergraduates who signing for the loans.