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.

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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.

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* 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.