() Subject: Interest rates for Direct Loan Program loans for the period July 1, 2001 through June 30, 2002

Subject: Interest rates for Direct Loan Program loans for the period

July 1, 2001 through June 30, 2002

Dear Partner:

This bulletin discusses the new interest rates, which will be in effect for the Direct Loan Program from July 1, 2001, through June 30, 2002.

Attached is a set of charts entitled New Interest Rates that show the new interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized Consolidation Loans and Direct Unsubsidized Consolidation Loans, as well as, Direct PLUS Loans and Direct PLUS Consolidation Loans that were disbursed on or after July 1, 1998. The charts also show how the new interest rates were determined using the 91-day Treasury bill rates and the add-on percentages.

The interest rates are based on the interest rate formulas given by statutory and regulatory authority. The interest rate formulas for all student and parent loans and for consolidation loans for which the application was received on or after October 1, 1998, are defined in Section 455(b) of the Higher Education Act of 1965, as amended (HEA). You can find the regulations for interest rate formulas for student, parent, and consolidation loans at 34 CFR 685.202(a), as published in 64 FR 46254.

The interest rates on all subsidized and unsubsidized loans, and on PLUS loans first disbursed on or after July 1, 1998, are the bond equivalent rate of 91-day Treasury bills sold at the final auction before June 1 plus an add on percentage. The rate for 91-day Treasury bills auctioned on May 29, 2001, was 3.688 percent, which rounds to 3.69 percent. The interest rates that are effective for the period July 1, 2001, through June 30, 2002 are shown in the attached charts.

Please note that the interest rates for the PLUS loans made before July 1, 1998 are not included in this bulletin or in the attached charts because the U.S. Treasury no longer auctions the 52-week Treasury bill. Section 455(b) of the HEA was amended in the Labor-Health and Human Services Appropriations Act to reflect this change. Before this change, we used the 52-week Treasury bill auctioned at the final auction before June 1. Now, we must use the weekly average of a 1-year constant maturity Treasury yields, as published by the Board of Governors of the Federal Reserve System, for the last calendar week ending on or before June 26. In June, we will send you a similar Direct Loan Bulletin detailing the interest rates for PLUS loans disbursed before July 1, 1998.

Thank you for your continued partnership in the Direct Loan program.

Sincerely,

Jane Holman

Acting Director, Title IV Delivery

Schools Channel