A Guide to Student Loan Changes Taking Place on July 1, 2008

Contact: Gretchen Wright, 202.371.1999

Washington, DC - 06/17/2008 - 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. A complete consumer fact sheet with more details is available at: http://projectonstudentdebt.org/july1-2008.vp.html

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%.
Pew is no longer active in this line of work, but for more information, visit the Project on Student Debt Web site or visit the The Project on Student Debt on PewHealth.org.

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