Bulletin ID
DLB - 98 - 31
| PublicationDate: 8/1/98 BulletinID: DLB - 98 - 31 July 1998 DLB-98-31 SUBJECT: Interest Rates for Direct Loan Program Loans for the Period July 1, 1998, through June 30, 1999 Dear Colleague: The variable interest rates for Direct Loan Program loans were adjusted on July 1, 1998. The tables below show the interest rates for student and parent loans for the period July 1, 1998, through June 30, 1999. The tables are followed by an explanation of how these interest rates were determined. [[This file contains the "Interest Rates for Direct Loan Program Loans for the Period July 1, 1998, through June 30, 1999" in Portable Document Format (PDF). It can be viewed with version 3.0 or greater of the free Adobe Acrobat Reader software.]] For all student loans, the basis for the interest rates is the bond equivalent rate of 91-day Treasury bills sold at the final auction before June 1 of each year; the interest rate may not exceed 8.25%. The bond equivalent rate for 91-day Treasury bills auctioned on May 26, 1998, was 5.16 percent. Student loans first disbursed before July 1, 1995: during all periods the interest rate equals the bond equivalent rate plus 3.1 percentage points (5.16% + 3.1% = 8.26%, capped at 8.25%). Student loans first disbursed on or after July 1, 1995, and before July 1, 1998: * during an in-school, grace, or deferment period, the interest rate equals the bond equivalent rate plus 2.5 percentage points (5.16% + 2.5% = 7.66%) * during all other periods, the interest rate equals the bond equivalent rate plus 3.1 percentage points (5.16% + 3.1% = 8.26%, capped at 8.25%). Student loans first disbursed on or after July 1, 1998: * during an in-school, grace, or deferment period, the interest rate equals the bond equivalent rate plus 1.7 percentage points (5.16% + 1.7% = 6.86%). * during all other periods, the interest rate equals the bond equivalent rate plus 2.3 percentage points (5.16% + 2.3% = 7.46%). For parent loans first disbursedbefore July 1, 1998, the basis for the interest rate is the bond equivalent rate of 52-week Treasury bills sold at the final auction prior to June 1 of each year; the interest rate may not exceed 9 percent. The rate for 52-week bills auctioned on May 21, 1998, was 5.43 percent. Parent loans first disbursed before July 1, 1998: the interest rate equals the bond equivalent rate plus 3.1 percentage points (5.43% + 3.1% = 8.53%). For parent loans first disbursedon or after July 1, 1998, the basis for the interest rate is the bond equivalent rate of 91-day Treasury bills sold at the final auction prior to June 1 of each year; the interest rate may not exceed 9 percent. The rate for 91-day bills auctioned on May 26, 1998, was 5.16 percent. Parent loans first disbursed on or after July 1, 1998: the interest rate equals the bond equivalent rate plus 3.1 percentage points (5.16% + 3.1% = 8.26%). FOR INTEREST RATE FORMULAS Student and parent loans (other than consolidation loans) The interest rate formulas for Direct Loan Program student and parent loans first disbursed before July 1, 1998, are specified in section 455(b) of the Higher Education Act of 1965, as amended (the HEA) and in the Direct Loan Program regulations at 34 CFR 685.202(a). The interest rate formulas for student and parent loans first disbursed on or after July 1, 1998, are specified in the Temporary Student Loan Provision, Section 8301 of the Transportation Equity Act for the 21st Century. Consolidation loans Section 455(g) of the HEA gives the Secretary of Education the authority to establish the terms and conditions of Direct Consolidation Loans through regulations. In accordance with 34 CFR 685.215(g), the interest rates for Direct Consolidation Loans are the same as the interest rates for student and parent loans made during the same period. If you have any questions, please call the Customer Support Branch for Student Financial Assistance Programs at 1-800-4ED-SFAP (1-800-433-7327) from 9 am to 5 pm, Eastern Time, Monday through Friday. You may also fax your questions to the Customer Support Branch at 202-260-4199, or send them via electronic mail to: csb@sfa.ed.gov Please be sure to include your name, the name of your institution, and your phone number. Sincerely, Joe L. McCormick Chair Direct Loan Task Force |