Retirement & Financial Planning Report

For many college graduates, repaying student loans has become less expensive. Parents who borrowed money to pay college bills also are enjoying some debt relief.


Federal student and parent loans taken out before July 2006 were variable-rate. Now the interest rates reset each year, linked to the yield on 91-day Treasury bills. In July, those rates took one of steepest drops on record, reflecting the Fed’s recent rate cuts.

* From July 2007 through June 2008, interest rates on variable-rate federal Stafford student loans were 7.22 percent. In July, that rate fell to 4.21 percent.

* Federal parent PLUS loan rates dropped from 8.02 percent to 5.01 percent in July 2008.

The new Stafford and PLUS rates will stay in effect through June 2009.


* For recent grads, the six months after graduation is called a grace period, before repayment of Stafford loans must begin. During the grace period, interest rates on Stafford loans are only 3.6 percent.