Higher rates? Not on student loans

Higher rates? Not on student loans
Rates on some education loans will fall to record lows. Here's what you need to know.
May 26, 2004: 10:08 AM EDT
By Jeanne Sahadi, CNN/Money senior writer

NEW YORK (CNN/Money) – Many Fed watchers anticipate a rate hike by summer and a gradual rising of rates in areas that directly affect consumers. But in at least one rate-sensitive area, interest rates will be setting yet another record low.

Interest rates for federally guaranteed, variable-rate student loans that were issued after July 1,1998 will drop 0.05 percent, based on the results of Monday's auction of the 91-day Treasury bill to which the rates are tied.

So, for the period beginning July 1 through June 30 of next year, Stafford loan rates will drop to 2.77 percent from the current rate of 2.82 percent for those borrowers still in school, in their grace periods (that is, within 6 months after graduation) or in deferment. For borrowers in the repayment phase, their rate will drop to 3.37 percent from 3.42 percent.

Rates on Parent Loans for Undergraduate Students (PLUS), meanwhile, will fall to 4.17 percent from today's 4.22 percent.