How student loan rates
are calculated
By Lucy
Lazarony • Bankrate.com
The U.S. Department of Education sets variable loan
rates each year based on the rate for 91-day treasury bills at the
last auction in May. On May 31, the rate for 91-day treasury bills
was 3.0, an increase of 1.93 percent from 2004.
Because of this, interest rates
on Stafford loans, the largest source of student loan funds in the
country, and Parent Loan for Undergraduate Students (PLUS) loans,
a popular loan program for parents, increased for the first time
in 5 years.
On July 1, the interest rate on
federal Stafford loans will increase from 3.37 percent to 5.30 percent
and the interest rate on federal PLUS loans increases to 6.10 percent
from 5.07 percent.
These interest rates only apply
to Stafford loans and PLUS loans disbursed after July 1, 1998. The
rate increase will remain in effect through June 30, 2006.
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