Monday, July 5, 2010

College-Bound Students Take Note: July 1 Brings New, Lower Student Loan Interest Rates

(BUSINESS WIRE)--Here’s news that 19 million people signing up for college classes this fall may want to hear: if you’re considering student loans to help foot the tuition bill, you may qualify for lower interest rates.

For the 2010-2011 academic year, rates on need-based federal Stafford student loans will decline from 5.6 percent to 4.5 percent, says Sallie Mae, the nation’s leading saving, planning and paying for college company. As a result, if you borrow $5,500 and pay off in the standard 10 years after graduation, you can save an estimated $350—enough for a semester’s worth of books or a month’s car payment. Rates on non-need-based federal Stafford loans remain 6.8 percent.

To qualify for federal student loans, you must first fill out the government’s Free Application for Federal Student Aid, also known as the FAFSA.

Keep in mind that the maximum amount you can borrow in federal Stafford loans varies between $5,500 and $7,500 for undergraduate students, depending on your year in college. To qualify, you also need to attend school at least half-time. Another change beginning July 1: federal Stafford loans will come directly from the U.S. Department of Education.

Sallie Mae’s Smart Option Student Loan also has lower interest rates for upcoming academic year, ranging between 2.88 percent and 10.25 percent for degree- seeking students, based on today’s LIBOR index. A customer’s actual interest rate depends on credit history and whether a cosigner applies, among other factors and will reset periodically based upon future changes in the LIBOR index. In addition, the company recently eliminated disbursement fees and added an on-time payment award. This private loan from Sallie Mae is available to help you fill the gap between the school’s cost of attendance and your other financial aid.

With Sallie Mae’s Smart Option Student Loan, students pay interest while in school, graduate with less debt, and pay off their loans faster, saving more than 50 percent in finance charges over the life of their loan. A typical freshman borrowing $10,000 makes payments of principal and interest for only seven years after graduation rather than 15 years. The customer saves approximately $8,800—compared to other private student loan alternatives in which no payments are made until after graduation. For more information, visit www.SallieMae.com/loansmart.

Sallie Mae advises families to follow the 1-2-3 approach to paying for college: first maximize scholarships and grants, along with savings and income. Second, explore federal student loans. Third, fill any gap with a pay-interest-as-you-go private education loan.

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