SUMMARY: The Assistant Secretary for Postsecondary Education announces the interest rates for variable-rate loans made under the William D. Ford Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program for the period

[Federal Register: July 8, 1998 (Volume 63, Number 130)]

[Notices]               

[Page 37025-37028]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr08jy98-171]



[[Page 37025]]


_______________________________________________________________________


Part V






Department of Education






_______________________________________________________________________




William D. Ford Federal Direct Loan Program; Federal Family Education 

Loan Program; Notice



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DEPARTMENT OF EDUCATION



William D. Ford Federal Direct Loan Program; Federal Family 

Education Loan Program


AGENCY: Office of Postsecondary Education, Department of Education


ACTION: Notice of interest rates for the William D. Ford Federal Direct 

Loan Program and the Federal Family Education Loan Program for the 

period July 1, 1998, through June 30, 1999.


-----------------------------------------------------------------------


SUMMARY: The Assistant Secretary for Postsecondary Education announces 

the interest rates for variable-rate loans made under the William D. 

Ford Federal Direct Loan (Direct Loan) Program and the Federal Family 

Education Loan (FFEL) Program for the period July 1, 1998-June 30, 

1999.


FOR FURTHER INFORMATION CONTACT: For the FFEL Program: Brian Smith, 

Program Specialist. For the Direct Loan Program: Barbara F. Grayson, 

Program Specialist. Mailing address: Policy Development Division, 

Office of Postsecondary Education, U.S. Department of Education, Room 

3045, ROB-3, 600 Independence Avenue, SW, Washington, DC 20202-5345. 

Telephone: (202) 708-8242. Individuals who use a telecommunications 

device for the deaf (TDD) may call the Federal Information Relay 

Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8 p.m., Eastern 

Daylight time, Monday through Friday.

Individuals with disabilities may obtain this document in an 

alternate format (e.g., Braille, large print, audiotape or computer 

diskette) on request to the contact persons listed in the preceding 

paragraph.


SUPPLEMENTARY INFORMATION:


General


Section 455(b) of the Higher Education Act of 1965, as amended (the 

HEA), 20 U.S.C. 1087e(b), provides that variable interest rates apply 

to loans made under the Direct Loan Program. Section 427A of the HEA, 

20 U.S.C. 1077a, provides that variable interest rates apply to certain 

loans made under the FFEL Program. The variable rates for Direct Loan 

Program loans and FFEL Program loans are determined annually and apply 

for each 12-month period beginning July 1 and ending June 30.

The formulas for determining the interest rates charged to 

borrowers for Direct Loan Program and FFEL Program loans, except for 

Consolidation loans in both programs, are provided in the following 

legislation:

- For Direct Loan Program loans for which the first 

disbursement is made before July 1, 1998, section 455 of the HEA (20 

U.S.C. 1087e).

- For FFEL Program loans for which the first disbursement is 

made before July 1, 1998, section 427A of the HEA (20 U.S.C. 1077a).

- For FFEL Program loans and Direct Loan Program loans for 

which the first disbursement is made on or after July 1, 1998, and 

before October 1, 1998, section 8301 of Pub.L. 105-178 (the 

Transportation Equity Act for the 21st Century).

The interest rate calculations for all parent and student loans in 

the Direct Loan and FFEL programs for which the first disbursement is 

made on or after July 1, 1998, and before October 1, 1998, are based on 

the bond equivalent rate of the 91-day Treasury bills auctioned at the 

final auction held before June 1.

The formulas for determining the interest rates charged to 

borrowers of Direct Consolidation loans and FFEL Consolidation loans 

are provided in the following legislation and regulation:

    - For Direct Consolidation loans, 34 CFR 685.215(g).

    - For FFEL Consolidation loans for which the consolidation 

loan application was received by an eligible lender before November 13, 

1997, section 428C(c)(1) of the HEA (20 U.S.C. 1078-3(c)(1)).

    - For FFEL Consolidation loans for which the consolidation 

loan application was received by an eligible lender on or after 

November 13, 1997, and before October 1, 1998, section 428C(c)(1)(D) of 

the HEA, 20 U.S.C. 1078-3(c)(1)(D) (as added by the Emergency Student 

Loan Consolidation Act of 1997).

Section 455(g) of the HEA, 20 U.S.C. 1087e(g), gives the Secretary 

discretion to establish the interest rates for Direct Consolidation 

loans. Under 34 CFR 685.215(g), for consolidation loans, the interest 

rate is the same as the interest rate for student and parent loans made 

during that time.

As described later in this notice, the interest rate for FFEL 

Consolidation Loans is set by statute.

The bond equivalent rate of the 91-day Treasury bills auctioned at 

the final auction held before June 1 of each year is used as the index 

to calculate annual interest rates charged to borrowers with the 

following loans:

    Federal Direct Stafford/Ford loans (Direct Subsidized).

    Federal Direct Unsubsidized Stafford/Ford loans (Direct 

	Unsubsidized).

    Federal Direct Subsidized Consolidation loans.

    Federal Direct Unsubsidized Consolidation loans.

    FFEL Stafford loans (subsidized and unsubsidized).

    FFEL Consolidation loans for applications received on or after 

	November 13, 1997.

    Federal Direct PLUS loans for which the first disbursement is made 

	on or after July 1, 1998.

    Federal Direct PLUS Consolidation loans made on or after July 1, 

	1998.

    FFEL PLUS loans for which the first disbursement was made on or 

	after July 1, 1998.

The bond equivalent rate of the 52-week Treasury bills auctioned in 

the final auction held before June 1 of each year is used to calculate 

annual interest rates charged to borrowers with the following loans:

Federal Direct PLUS loans for which the first disbursement was made 

before July 1, 1998.

Federal Direct PLUS Consolidation loans for which the first 

disbursement was made before July 1, 1998.

FFEL PLUS loans for which the first disbursement was made before 

July 1, 1998.

FFEL Supplemental Loans for Students (SLS).

The bond equivalent rate of the 91-day Treasury bills auctioned on 

May 26, 1998, is 5.155 percent, which rounds to 5.16 percent.

The bond equivalent rate of 52-week Treasury bills auctioned on May 

21, 1998, is 5.434 percent, which rounds to 5.43 percent.


William D. Ford Federal Direct Loan Program


Interest Rates for Direct Subsidized, Direct Unsubsidized, Direct 

Subsidized Consolidation, and Direct Unsubsidized Consolidation Loans


1. Direct Subsidized, Direct Unsubsidized, Direct Subsidized 

Consolidation, and Direct Unsubsidized Consolidation Loans for which 

the first disbursement was made prior to July 1, 1995--the interest 

rate may not exceed 8.25 percent: Pursuant to section 455(b)(1) of the 

HEA, 20 U.S.C. 1087e(b)(1), the interest rate for the period July 1, 

1998, through June 30, 1999, is 8.25 percent (5.16 percent plus 3.1 

percent equals 8.26 percent, which exceeds the 8.25 percent cap).

2. Direct Subsidized, Direct Unsubsidized, Direct Subsidized 

Consolidation, and Direct Unsubsidized Consolidation Loans for which 

the first disbursement was made on or after July 1, 1995, and before 

July 1, 1998--the interest rate may not exceed 8.25 percent:

(a) During the in-school, grace, and deferment periods: Pursuant to 

section


[[Page 37027]]


455(b)(2) of the HEA, 20 U.S.C. 1087e(b)(2), the interest rate for the 

period July 1, 1998, through June 30, 1999, is 7.66 percent (5.16 

percent plus 2.5 percent equals 7.66 percent).

(b) During all other periods: Pursuant to section 455(b)(1) of the 

HEA, 20 U.S.C. 1087e(b)(1), the interest rate for the period July 1, 

1998, through June 30, 1999, is 8.25 percent (5.16 percent plus 3.1 

percent equals 8.26 percent, which exceeds the 8.25 percent cap).

3. Direct Subsidized and Direct Unsubsidized Loans for which the 

first disbursement is made on or after July 1, 1998, and before October 

1, 1998--the interest rate may not exceed 8.25 percent:

(a) During the in-school, grace, and deferment periods: Pursuant to 

section 8301 of Pub. L. 105-178, the interest rate for the period July 

1, 1998, through June 30, 1999, is 6.86 percent (5.16 percent plus 1.7 

percent equals 6.86 percent).

(b) During all other periods: Pursuant to section 8301 of Pub.L. 

105-178, the interest rate for the period July 1, 1998, through June 

30, 1999, is 7.46 percent (5.16 percent plus 2.3 percent equals 7.46 

percent).

4. Direct Subsidized Consolidation and Direct Unsubsidized 

Consolidation Loans for which the first disbursement is made on or 

after July 1, 1998, or for which the consolidation loan application is 

received by the Secretary on or after July 1, 1998--the interest rate 

may not exceed 8.25 percent:

(a) During the in-school, grace, and deferment periods: Pursuant to 

section 455(g) of the HEA, 20 U.S.C. 1087e(g) and 34 CFR 685.215(g), 

the interest rate for the period July 1, 1998, through June 30, 1999, 

is 6.86 percent (5.16 percent plus 1.7 percent equals 6.86 percent).

(b) During all other periods: Pursuant to section 455(g) of the 

HEA, 20 U.S.C. 1087e(g) and 34 CFR 685.215(g), the interest rate for 

the period July 1, 1998, through June 30, 1999, is 7.46 percent (5.16 

percent plus 2.3 percent equals 7.46 percent).


Interest Rates for Direct PLUS and Direct PLUS Consolidation Loans


1. Direct PLUS loans and Direct PLUS Consolidation loans for which 

the first disbursement was made before July 1, 1998: Pursuant to 

section 455(b)(4) of the HEA, 20 U.S.C. 1087(e)(b)(4), the interest 

rate for the period July 1, 1998, through June 30, 1999, is 8.53 

percent (5.43 percent plus 3.1 percent equals 8.53 percent).

2. Direct PLUS loans for which the first disbursement is made on or 

after July 1, 1998, and before October 1, 1998--the interest rate may 

not exceed 9 percent: Pursuant to section 8301 of Pub.L. 105-178, the 

interest rate for the period July 1, 1998, through June 30, 1999, is 

8.26 percent (5.16 percent plus 3.1 percent equals 8.26 percent).

3. Direct PLUS Consolidation loans for which the first disbursement 

is made on or after July 1, 1998, or for which the consolidation loan 

application is received by the Secretary on or after July 1, 1998--the 

interest rate may not exceed 9 percent: Pursuant to section 455(g) of 

the HEA, 20 U.S.C. 1087e(g) and 34 CFR 685.215(g), the interest rate 

for the period July 1, 1998, through June 30, 1999, is 8.26 percent 

(5.16 percent plus 3.1 percent equals 8.26 percent).


Federal Family Education Loan Program


Interest Rates for ``Converted'' Variable-rate FFEL Stafford Loans


1. FFEL Stafford loans which were made with an interest rate of 

eight percent with an increase to ten percent and that were subject to 

the ``windfall profits'' provisions of section 427A(i)(1) of the Act, 

20 U.S.C. 1077a(i)(7), and that have been converted to a variable 

interest rate--the interest rate may not exceed 10 percent: Pursuant to 

section 427A(i)(7)(A) of the HEA, 20 U.S.C. 1077a(i)(7)(A), the 

interest rate for the period July 1, 1998, through June 30, 1999, is 

8.41 percent (5.16 percent plus 3.25 percent equals 8.41 percent).

2. Seven percent, eight percent, nine percent and eight/ten percent 

loans that were subject to the ``windfall profits'' provisions of 

section 427A(i)(3) of the HEA, 20 U.S.C. 1077a(i)(3), and that have 

been converted to a variable interest rate--the interest rate may not 

exceed seven percent, eight percent, nine percent, or ten percent, 

respectively: Pursuant to section 427A(i)(7)(A) of the Act, 20 U.S.C. 

1077a(i)(7)(A), the interest rate for the period July 1, 1998, through 

June 30, 1999, is 7 percent for 7 percent loans, 8 percent for 8 

percent loans, 8.26 percent for 9 percent loans, and 8.26 percent for 

10 percent loans (5.16 percent plus 3.1 percent equals 8.26 percent, 

which exceeds the cap for 7 percent loans and 8 percent loans).


Interest Rates for Regular Variable-rate FFEL Stafford Loans


1. FFEL Stafford loans made to ``new'' borrowers for which the 

first disbursement was made (a) on or after October 1, 1992, but before 

July 1, 1994, or (b) on or after July 1, 1994, for a period of 

enrollment ending before July 1, 1994, (i.e., a late disbursement)--the 

interest rate may not exceed 9 percent: Pursuant to section 427A(e)(1) 

of the HEA, 20 U.S.C. 1077a(e)(1), the interest rate for the period 

July 1, 1998, through June 30, 1999, is 8.26 percent (5.16 percent plus 

3.1 percent equals 8.26 percent).

2. FFEL Stafford loans made to all borrowers, regardless of prior 

borrowing, for a period of enrollment that includes or begins on or 

after July 1, 1994, for which the first disbursement was made on or 

after July 1, 1994, but before July 1, 1995--the interest rate may not 

exceed 8.25 percent: Pursuant to section 427A(f)(1) of the HEA, 20 

U.S.C. 1077a(e)(1), the interest rate for the period July 1, 1998, 

through June 30, 1999, is 8.25 percent (5.16 percent plus 3.1 percent 

equals 8.26 percent which exceeds the 8.25 percent cap).

3. FFEL Stafford loans made to all borrowers, regardless of prior 

borrowing, for which the first disbursement was made on or after July 

1, 1995, but before July 1, 1998--the interest rate may not exceed 8.25 

percent:

(a) During the in-school, grace, or deferment period: Pursuant to 

section 427A(g)(2) of the HEA, 20 U.S.C. 1077a(g)(2), the interest rate 

for the period July 1, 1998, through June 30, 1999, is 7.66 (5.16 

percent plus 2.5 percent equals 7.66 percent).

(b) During the repayment period (except deferment periods): 

Pursuant to section 427A(f)(1) of the HEA, 20 U.S.C. 1077a(f)(1), the 

interest rate for the period July 1, 1998, through June 30, 1999, is 

8.25 percent (5.16 percent plus 3.1 percent equals 8.26 percent, which 

exceeds the 8.25 percent cap).

4. FFEL Stafford loans, for which the first disbursement is made on 

or after July 1, 1998, but before October 1, 1998--the interest rate 

may not exceed 8.25 percent:

(a) During the in-school, grace, and deferment periods: Pursuant to 

section 8301 of Pub.L. 105-178, the interest rate for the period July 

1, 1998, through June 30, 1999, is 6.86 percent (5.16 percent plus 1.7 

percent equals 6.86 percent).

(b) During all other periods: Pursuant to section 8301 of Pub.L. 

105-178, the interest rate for the period July 1, 1998, through June 

30, 1999, is 7.46 percent (5.16 percent plus 2.3 percent equals 7.46 

percent).


Interest Rates for FFEL PLUS and FFEL Supplemental Loans for Students 

Loans


1. Variable-rate FFEL PLUS loans and FFEL SLS loans made before 

October 1, 1992--the interest rate may not exceed 12 percent: Pursuant 

to section 427A(c)(4)(B) of the HEA, 20 U.S.C. 1077a(c)(4)(B), the 

interest rate for the period July 1, 1998, through June 30,


[[Page 37028]]


1999, is 8.68 percent (5.43 percent plus 3.25 percent equals 8.68 

percent).

2. FFEL SLS loans for which the first disbursement was made on or 

after October 1, 1992, for a period of enrollment beginning before July 

1, 1994--the interest rate may not exceed 11 percent: Pursuant to 

section 427(c)(4) of the HEA, 20 U.S.C. 1077a(c)(4), the interest rate 

for the period July 1, 1998, through June 30, 1999, is 8.53 percent 

(5.43 percent plus 3.1 percent equals 8.53 percent).

3. FFEL PLUS loans for which the first disbursement was made on or 

after October 1, 1992, but before July 1, 1994--the interest rate may 

not exceed 10 percent: Pursuant to section 427A(c)(4)(D) of the HEA, 20 

U.S.C. 1077a(c)(4)(D), the interest rate for the period July 1, 1998, 

through June 30, 1999, is 8.53 percent (5.43 percent plus 3.1 percent 

equals 8.53 percent).

4. FFEL PLUS loans for which the first disbursement was made on or 

after July 1, 1994 but prior to July 1, 1998--the interest rate may not 

exceed 9 percent: Pursuant to section 427(c)(4)(E) of the HEA, 20 

U.S.C. 1077a(c)(4)(E),the interest rate for the period July 1, 1998, 

through June 30, 1999, is 8.53 percent (5.43 percent plus 3.1 percent 

equals 8.53 percent).

5. FFEL PLUS loans for which the first disbursement is made on or 

after July 1, 1998, and before October 1, 1998--the interest rate may 

not exceed 9 percent: Pursuant to section 8301 of Pub.L. 105-178, the 

interest rate for the period July 1, 1998, through June 30, 1999, is 

8.26 percent (5.16 percent plus 3.1 percent equals 8.26 percent).


Interest Rates for FFEL Consolidation Loans


1. FFEL Consolidation loans made before July 1, 1994--the interest 

rate may not exceed 9 percent: Pursuant to section 428C(c)(1)(B) of the 

HEA, 20 U.S.C. 1078-3(c)(1)(B), the interest rate is the weighted 

average of the interest rates on the loans consolidated, rounded to the 

nearest whole percent.

2. FFEL Consolidation loans made on or after July 1, 1994, for 

which the consolidation loan application was received by an eligible 

lender before November 13, 1997: Pursuant to section 428C(c)(1)(C) of 

the HEA, 20 U.S.C. 1078-3(c)(1)(C), the interest rate is the weighted 

average of the interest rates on the loans consolidated, rounded upward 

to the nearest whole percent.

3. FFEL Consolidation loans for which the consolidation loan 

application is received by an eligible lender on or after November 13, 

1997--the interest rate may not exceed 8.25 percent: Pursuant to 

section 428C(c)(1)(D) of the HEA, 20 U.S.C. 1078-3(c)(1)(D), the 

interest rate for the period July 1, 1998, through June 30, 1999, is 

8.25 percent (5.16 percent plus 3.1 percent equals 8.26 percent which 

exceeds the 8.25 percent cap).


Electronic Access to This Document


Anyone may view this document as well as all other Department of 

Education documents published in the Federal Register, in text or 

portable document format (pdf) on the World Wide Web at either of the 

following sites:


http://ocfo.ed.gov/fedreg.htm

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To use the pdf you must have the Adobe Acrobat Reader Program with 

Search, which is available free at either of the previous sites. If you 

have questions about using the pdf, call the U.S. Government Printing 

Office toll free at 1-888-293-6498. Anyone may also view these 

documents in text copy only on an electronic bulletin board of the 

Department. Telephone: (202) 219-1511 or, toll free, 1-800-222-4922. 

The documents are located under Option G-- Files/Announcements, 

Bulletins and Press Releases.


Note: The official version of this document is the document 

published in the Federal Register.


(Authority: 20 U.S.C. 1077a and 20 U.S.C. 1087e).


Dated: July 6, 1998.

David A. Longanecker,

Assistant Secretary for Postsecondary Education.

[FR Doc. 98-18267 Filed 7-6-98; 2:40 pm]

BILLING CODE 4000-01-P