Stafford Loan Interest Rate Reduction: Background and Issues Page: 3 of 6
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the two types of loans are that for unsubsidized Stafford Loans, the federal government
does not pay the interest that accrues while the borrower is in school or during deferment
and grace periods; and students may qualify for unsubsidized Stafford Loans irrespective
of their expected family contribution (EFC) (i.e., they are not need-based).3
Interest Rates. Both subsidized and unsubsidized Stafford Loans carry the same
interest rate. For loans disbursed on or after July 1, 2006, the interest rate is fixed at
6.8%. For loans disbursed between October 1, 1992, and June 30, 2006, the interest rate
is variable and adjusts annually. The formula used to calculate the variable interest rate
for those loans is determined by statute and stays in effect from the time the loan is
disbursed through the life of the loan, or until the loan is consolidated. The variable rate
is calculated based upon the bond equivalent rate of the 91-day Treasury bill, plus a
premium which differs depending on when the loan was disbursed; and whether the
borrower is in school, a grace period, or deferment, or is in repayment. The interest rate
on variable rate loans adjusts each year on July 1. Prior to October 1, 1992, Stafford
Loans carried fixed interest rates. Table 1 presents a history of interest rates in effect
during repayment on Stafford Loans disbursed on or after October 1, 1992.4
Table 1. Stafford Loan Interest Rates in Effect During Repayment:
1992-1993 through 2006-2007
Date Oct. 1, 1992 to July 1, 1994 to July 1, 1995 to July 1, 1998 to On or after
June 30, 1994 June 30, 1995 June 30, 1998 June 30, 2006 July 1, 2006
1994-1995 7.43 7.43
1995-1996 8.92 8.25 8.25
1996-1997 8.26 8.25 8.25
1997-1998 8.26 8.25 8.25
1998-1999 8.26 8.25 8.25 7.46
1999-2000 7.72 7.72 7.72 6.92
2000-2001 8.99 8.25 8.25 8.19
2001-2002 6.79 6.79 6.79 5.99
2002-2003 4.86 4.86 4.86 4.06
2003-2004 4.22 4.22 4.22 3.42
2004-2005 4.17 4.17 4.17 3.37
2005-2006 6.10 6.10 6.10 5.30
2006-2007 7.94 7.94 7.94 7.14 6.80
Sources: U.S. Dept. of Education, Office of Federal Student Aid, FFEL Variable Interest Rates; and CRS
Report RL32424, Consolidation Loans: Redesign Options and Considerations, by Adam Stoll.
3 For a thorough discussion of subsidized and unsubsidized Stafford Loans, see CRS Report
4 Lower interest rates apply during in-school, grace, and deferment periods; however, since for
subsidized Stafford Loans, this interest is paid by the federal government during these periods,
these rates are not shown. Lenders also may make loans at lower interest rates or reduce rates
for timely repayment.
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Stafford Loan Interest Rate Reduction: Background and Issues, report, January 30, 2007; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc808160/m1/3/: accessed September 24, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.