Loan Interest

Interest Rates and Your Student Loans

The interest rate on your student loans is the most important term of the loan after the amount of the loan itself. Interest is  the amount owed above the agreed upon loan. Think of it as the on-going cost of borrowing the money. Interest is figured as a percentage of the loan total, and on a student loan this interest can accrue from the day the loan is disbursed or the first day of loan repayment.

Questions to Ask About Any Loan

Before borrowing, it is important to understand what the interest rate is going to do to your payments, and what the final amount you end up borrowing is actually going to be. Banks and lending services all have loan calculators on their websites that will help you with this. Before you proceed, make sure you ask these questions:

  • Is my interest rate fixed or variable?
  • If it is variable, how high can it go?
  • When will interest begin accruing?
  • When am I required to pay off the loan?

Student Loan Interest Rates

  • Interest rate for the 2011-2012 academic year on Stafford Loans is 3.4 per cent for subsidized loans and 6.80 per cent for unsubsidized. For the 2012-2012 year, however, the subsidized rate will increase to 6.8% Graduate Stafford Loans also carry a 6.80 per cent interest rate. The interest rate on Stafford is fixed.
  • Perkins Loan interest rates are fixed at 5 per cent.
  • Parent and Grad PLUS Loans have a fixed interest rate of 7.9 per cent.
  • Private or alternative student loans may have variable interest rates that start low and increase over time. The lender may reserve the right to change rates without notice. With private loans, it is particularly necessary to read and understand the fine print.