Federal Student Loans Made Under the Federal Family Education Loan Program and the William D Ford Federal Direct Loan Program: Terms and Conditions for Borrowers

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The federal government operates two major student loan programs: the Federal Family Education
Loan (FFEL) program, authorized under Title IV, Part B of the Higher Education Act (HEA), and
the William D. Ford Federal Direct Loan (DL) program, authorized under Title IV, Part D of the
HEA. These programs make available loans to undergraduate and graduate students and the
parents of dependent undergraduate students to help them finance the costs of postsecondary
education. Together, these programs provide more direct aid to support students’ postsecondary
educational pursuits than any other single source. In FY2009, it is estimated that these programs
will provide $74 billion in new loans to students and their parents.
Under the FFEL program, loan capital is provided by private lenders, and the federal government
guarantees lenders against loss through borrower default, death, permanent disability, or, in
limited instances, bankruptcy. Under the DL program, the federal government provides the loans
to students and their families, using federal capital (i.e., funds from the U.S. Treasury). The two
programs rely on different sources of capital and different administrative structures, but
essentially disburse the same set of loans: Subsidized Stafford Loans and Unsubsidized Stafford
Loans for undergraduate and graduate students; PLUS Loans for graduate students and the
parents of dependent undergraduate students; and Consolidation Loans through which borrowers
may combine their loans into a single loan payable over a longer term, which varies according to
the combined loan balance.
The loans made through the FFEL and DL programs are low-interest loans, with maximum
interest rates for each type of loan established by statute. Subsidized Stafford Loans are unique in
that they are only available to students demonstrating financial need. The Secretary of Education
pays the interest that accrues on Subsidized Stafford Loans while borrowers are in school, during
a six-month grace period, and during authorized periods of deferment. Unsubsidized Stafford
Loans and PLUS Loans are available to borrowers irrespective of their financial need; and
borrowers are responsible for paying all the interest that accrues on these loans.
FFEL and DL program loans have terms and conditions that may be more favorable to borrowers
than private and other non-federal loans. These beneficial terms and conditions include interest
rates that are often lower than rates that might be obtained from other lenders, opportunities for
repayment relief through deferment and forbearance, loan consolidation, and several loan
forgiveness programs.
Numerous changes were made to the FFEL and DL programs under the College Cost Reduction
and Access Act (P.L. 110-84), the Ensuring Continued Access to Student Loans Act (P.L. 110-
227); and the Higher Education Opportunity Act (P.L. 110-315). This report describes the terms
and conditions of loans currently available to borrowers. It will be updated as warranted to reflect
programmatic changes.

Introduc tion ..................................................................................................................................... 1
FFEL and DL Program Loan Types..........................................................................................2
Stafford Loans and PLUS Loans.....................................................................................................4
Eligibility Requirements...........................................................................................................4
In General...........................................................................................................................4
PLUS Loans........................................................................................................................4
Factors That Affect Eligibility to Borrow...........................................................................5
Loan Limits...............................................................................................................................8
Annual Loan Limits............................................................................................................8
Aggregate Loan Limits.......................................................................................................9
Interest Rates............................................................................................................................11
Stafford Loans....................................................................................................................11
PLUS Loans......................................................................................................................12
Borrower Fees.........................................................................................................................13
Consolidation Loans......................................................................................................................14
Eligibility Requirements.........................................................................................................15
Interest Rates...........................................................................................................................16
Loan Consolidation During the Grace Period...................................................................16
Loan Consolidation and Borrower Benefits......................................................................16
Student Loan Discounts and Repayment Incentives.....................................................................17
Loan Discounts Under the FFEL Program........................................................................18
Repayment Incentives Under the DL Program.................................................................19
Loan Repayment............................................................................................................................20
In General................................................................................................................................20
Beginning of Repayment..................................................................................................20
Prepayme nt ....................................................................................................................... 20
Repayment Plans.....................................................................................................................20
Standard Repayment Plan.................................................................................................21
Graduated Repayment Plan...............................................................................................22
Extended Repayment Plan................................................................................................23
Income-Sensitive Repayment Plan...................................................................................23
Income-Contingent Repayment Plan................................................................................24
Income-Based Repayment Plan........................................................................................25
Alternative Repayment Plans............................................................................................26
Borrower Repayment Relief..........................................................................................................27
Deferments .............................................................................................................................. 27
In-School Deferment.........................................................................................................28
Graduate Fellowship Deferment.......................................................................................28
Rehabilitation Training Program Deferment.....................................................................28
Unemployment Deferment................................................................................................28
Economic Hardship Deferment.........................................................................................28
Military Service Deferment..............................................................................................30
Post-Active Duty Student Deferment...............................................................................30
Forbearanc e ............................................................................................................................. 30
Mandatory Forbearance....................................................................................................30

Mandatory Administrative Forbearance............................................................................31
Interest Rate Benefits for Active Duty Servicemembers.........................................................31
Servicemembers Civil Relief Act (SCRA)........................................................................31
No Accrual of Interest on DL Program Loans for Certain Active Duty Service
Members ........................................................................................................................ 31
Loan Default and its Consequences for Borrowers.......................................................................32
Consequences of Default for Borrowers.................................................................................32
Report to Consumer Reporting Agencies..........................................................................32
Offset of Tax Refund.........................................................................................................32
Offset of Social Security Benefits.....................................................................................33
Wage Garnishment............................................................................................................33
Ineligibility for Federal Student Aid.................................................................................33
Civil Lawsuit.....................................................................................................................33
Loan Rehabilitation.......................................................................................................................33
Loan Discharge and Forgiveness...................................................................................................34
Loan Discharge.......................................................................................................................34
Death or Disability............................................................................................................34
Bankruptcy ........................................................................................................................ 34
Other .......................................................................................................................... ....... 34
Loan Forgiveness....................................................................................................................35
Loan Forgiveness for Teachers.........................................................................................35
DL Program Loan Forgiveness for Public Service Employees.........................................36
Loan Forgiveness for Service in Areas of National Need.................................................36
Loan Repayment for Civil Legal Assistance Attorneys....................................................37
Table 1. Annual and Aggregate Loan Limits for Borrowers of Stafford Loans and PLUS
Loans, by Dependency Status and Grade Level..........................................................................9
Table 2. Stafford Loan Interest Rates............................................................................................12
Table 3. Borrower Fees on Stafford Loans and PLUS Loans, by Loan Program: Loans
Disbursed On or After July 1, 2006............................................................................................14
Table 4. Repayment Periods for Consolidation Loans Repaid According to the Standard,
Graduated, and Income-Sensitive Repayment Plans..................................................................22
Table B-1. Annual Loan Limits for Borrowers of Stafford Loans and PLUS Loans, by
Dependency Status and Grade Level..........................................................................................39
Table B-2. History of Annual Loan Limits for Stafford Loans and PLUS Loans, by
Borrower Type............................................................................................................................41
Table B-3. History of Aggregate Loan Limits for Stafford Loans and PLUS Loans, by
Borrower Type............................................................................................................................44
Table B-4. History of Stafford Loan Fixed Interest Rates and Variable Interest Rate
Formulas ..................................................................................................................................... 47
Table B-5. Stafford Loan Interest Rates in Effect, by Borrower Cohort: 1992-1993 to

2012-2013...................................................................................................................................49

Table B-6. History of PLUS Loan Fixed Interest Rates and Variable Interest Rate
Formulas ..................................................................................................................................... 52
Table B-7. PLUS Loan Interest Rates in Effect, by Borrower Cohort: 1992-1993 to 2012-
2013 ............................................................................................................................................ 53
Table B-8. History of Borrower Fees on Stafford Loans and PLUS Loans..................................55
Table B-9. History of Consolidation Loan Interest Rate Formulas...............................................56
Appendix A. Glossary of Financial Terms....................................................................................38
Appendix B. Detailed Tables on Selected Characteristics of FFEL and DL Program Loans........39
Author Contact Information..........................................................................................................57

The federal government operates two major student loan programs: the Federal Family Education ²
Loan (FFEL) program and the William D. Ford Federal Direct Loan (DL) program. These
programs can trace their roots to the Guaranteed Student Loan (GSL) program, originally enacted
in Title IV of the Higher Education Act (HEA) of 1965, to enhance access to postsecondary
education for students from low- and middle-income families by providing them access to low-
interest student loans.
The FFEL program, formerly named the GSL program, is authorized under Title IV, Part B of the
HEA. Under the FFEL program, loan capital is provided by private lenders, and the federal
government guarantees lenders against losses due to borrower default. The federal government
also provides private lenders a variety of incentives designed to ensure that private capital will ³
consistently be available to support FFEL program student loans. Private lenders originate FFEL
program loans, and state and nonprofit guaranty agencies receive federal funds to play the lead
role in administering the federal loan guarantee.
The DL program, established in 1993 and authorized under Title IV, Part D of the HEA, was
intended to streamline the student loan delivery system and achieve cost savings. Originally, it
was intended to gradually expand and replace the FFEL program.
The DL program provides the same set of loans as the FFEL program, but uses a different
administrative structure and draws on a different source of capital. Under the DL program, the
federal government essentially serves as the banker—the federal government provides the loans
to students and their families, using federal capital (i.e., funds from the U.S. Treasury), and owns
the loans. Under the DL program, schools may serve as direct loan originators or the loans may
be originated by a contractor working for the U.S. Department of Education (ED). ED also hires a
contractor to service the loans.
While the original authorizing language for DL program called for the program to expand its
share of new loan volume over a series of years, the Higher Education Amendments of 1998 (P.L.
105-244) ultimately removed the provisions of the law that referred to a “phase-in” of the DL
program and those which specified the proportion of new student loan volume to be made
through the DL program in particular academic years. Currently both programs are authorized.
Institutions of higher education (IHEs) may apply to participate in one program or in both.
Borrowers obtain loans annually under one program; and the program they borrow under is
determined by the IHE they attend.
¹
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Together, these federal student loan programs provide more direct aid to support students’
postsecondary educational pursuits than any other source. In FY2009, these programs are
projected to provide $74 billion in new loans to students and their parents. Under the FFEL
program, 12,702,000 new loans averaging approximately $4,669 each are projected to be made to

6,689,000 borrowers; and under the DL program, 2,961,000 new loans averaging approximately ⁴

$5,020 each are projected to be made to 1,769,000 borrowers.
This report discusses major provisions of federal student loans made available through the FFEL
and DL programs. The primary emphasis is placed on discussing provisions related to borrower
eligibility, loan terms and conditions, borrower repayment relief, and loan default and its
consequences for borrowers. These topics are principally discussed with regard to loans currently
being made. Historical information on certain prior terms and conditions is also presented in
instances where there remains substantial interest in those aspects of loans.
Subsidized Stafford Loans, Unsubsidized Stafford Loans, and PLUS Loans are the types of loans
students and their parents initially borrow to finance their postsecondary education expenses; and
Consolidation Loans are used for purposes of combining loan balances or extending the
repayment period. Eligibility requirements, loan limits, interest rates, and allowable fees for these
loans are reviewed in the next section. This is followed by a comparable section on Consolidation
Loans. The remainder of the report examines various terms and conditions of FFEL and DL
program loans that are applicable to all loan types. These include student loan discounts and
incentives, loan repayment, repayment relief, loan default, loan rehabilitation, loan discharge, and
loan forgiveness. A glossary of selected financial terms is included in Appendix A.
This report describes currently effective provisions of the FFEL and DL programs and reflects ^th
amendments that have been enacted through November 2008, including those enacted in the 110 ⁵
Congress under the College Cost Reduction and Access Act (CCRAA; P.L. 110-84), the ⁶
Ensuring Continued Access to Student Loans Act (ECASLA; P.L. 110-227), and the Higher ⁷
Education Opportunity Act (HEOA; P.L. 110-315). It also discusses recently enacted
amendments that take effect prospectively or that are temporary in duration.
The following types of federally sponsored student loans are available through the DL and FFEL
programs to support postsecondary student expenses: Subsidized Stafford Loans; Unsubsidized
Stafford Loans; PLUS Loans; and Consolidation Loans. (Loans made under the DL program are
officially referred to as Federal Direct Stafford Loans; Federal Direct Unsubsidized Stafford
⁴
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Loans; Federal Direct PLUS Loans; and Federal Direct Consolidation Loans.)⁸ A common feature
of all of these loans is that the federal government (as either the guarantor or lender) assumes the
risk for losses that may occur through borrower default, and pays for the discharge of loans in
cases of borrower death, disability, and other limited instances. Another common feature shared
by these loans is that, for each type of loan, maximum interest rates and fees that may be charged
to borrowers are established by statute.
These loans are need-based loans and are available to undergraduate, graduate, and professional
students. To qualify for a Subsidized Stafford Loan, a student must establish financial need. The
federal government “subsidizes” these loans by paying the interest on the loans while the
borrower is enrolled in an eligible program on at least a half-time basis, and during grace periods ⁹
and deferment periods. Subsidized Stafford Loans for which the first disbursement is made on or
after July 1, 2006, are fixed interest rate loans. The interest rate applicable to Subsidized Stafford
Loans depends on the type of student borrowing the loan and the date on which the first
disbursement of the loan is made. The fixed interest rate on Subsidized Stafford Loans to
undergraduate students for which the first disbursement is made on or after July 1, 2008, and
before July 1, 2009 is 6.0%. (Different interest rates apply to loans made to undergraduate
students during other periods; and these rates are presented later in this report.) The fixed interest
rate on Subsidized Stafford Loans to graduate and professional students for which the first
disbursement is made on or after July 1, 2006, is 6.8%.
These loans are non-need-based loans and are available to undergraduate, graduate, and
professional students. The federal government does not pay the interest on these loans while the
borrower is in school, nor during deferment and grace periods. The fixed interest rate on all
Unsubsidized Stafford loans made on or after July 1, 2006, is 6.8%.
These loans are non-need-based loans and are available to parents of dependent undergraduate ¹⁰
students and to graduate and professional students. The federal government does not pay the
⁸
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interest on PLUS Loans while the student on whose behalf the loan is made is in school, nor
during deferment and grace periods. The fixed interest rate on PLUS Loans for which the first
disbursement is made on or after July 1, 2006 is 8.5% for loans made under the FFEL program;
and 7.9% for loans made under the DL program.
These loans allow borrowers with existing federal student loans to combine their loan obligations
into a single loan and to extend their repayment period. Consolidation Loans currently being
disbursed are fixed rate loans. The interest rate for Consolidation Loans is based on the weighted
average interest rate of the loans being consolidated, rounded up to the nearest higher one-eighth
of 1%. Borrowers can qualify for Consolidation Loans regardless of financial need.

This section discusses borrower eligibility requirements, loan limits, interest rates, and allowable
fees for Subsidized Stafford Loans, Unsubsidized Stafford Loans, and PLUS Loans.
In general, to be eligible for any new loan under the FFEL and DL programs, a student borrower
must meet certain eligibility requirements. These include (1) be enrolled on at least a half-time
basis as a regular student in an eligible program at a participating eligible IHE or in a preparatory
program necessary for enrollment in an eligible program (for up to one year), or in a teacher
certification program; (2) not be incarcerated in a federal or state penitentiary; (3) be a U.S.
citizen or national, U.S. permanent resident, or other eligible non-citizen; (4) maintain
satisfactory academic progress as defined by the school; (5) not be in default on a federal student
loan nor owe a refund on a grant or loan made under Title IV without having made arrangements ¹¹
for repayment; (6) have on file at the institution attended, a statement of educational purpose
stating that the loan will be used solely for educational expenses; and (7) meet applicable
Selective Service registration requirements.
PLUS Loans may be borrowed by one or both parents of a dependent undergraduate student to
help finance the postsecondary education of a child who meets the basic eligibility criteria cited
above. Parent borrowers must also meet the same citizenship and residency requirements as
student borrowers; and may not be in default on a federal student loan nor owe a refund on a
grant or loan made under Title IV without having made arrangements for repayment. For
purposes of borrowing a PLUS Loan for a dependent student, eligible parents include biological
¹¹
^T^itle^IV^of^the^HEA^a^u^th^oriz^e^s^m^o^st^f^e^de^ra^{l stude}^{nt a}ⁱ^d^pr^og^ra^m^s^{, inc}^l^udi^ng^the^F^F^EL^a^{nd DL}^pro^g^r^a^m^{s. Stude}^nts
^w^{ho de}^f^a^{ult on l}^o^aⁿ^{s m}^a^de^un^de^r^the^FFEL^,^DL^{, or}^Fe^de^ra^l^P^e^rk^ins^L^o^aⁿ^prog^ra^m^s^m^a^y^ha^v^e^theⁱ^{r e}^lig^ibility^f^o^{r T}^itle
^IV^aⁱ^d^re^store^d^thr^oug^{h re}^ha^bilita^tion^pr^ov^{isions t}^h^a^t^m^a^y^va^r^y^b^y^prog^ra^m^.^Re^insta^t^e^m^eⁿ^{t is only}^a^v^a^ila^ble^onc^e^.

parents, adoptive parents, and—if their income and assets are taken into account in determining a
student’s expected family contribution (EFC)—stepparents. Legal guardians may not borrow
PLUS Loans as parent borrowers.
To be eligible to borrow a PLUS Loan as a parent borrower or a graduate or professional student
borrower, an individual may not have an adverse credit history, as determined pursuant to ED
regulations. Dependent undergraduate students whose parents are unable to obtain a PLUS Loan
due to an adverse credit history are eligible to borrow increased Unsubsidized Stafford Loan
amounts (discussed below).
According to regulations in effect prior to the enactment of the ECASLA, lenders were required
to obtain at least one credit report on all applicants for PLUS Loans; and unless extenuating
circumstances existed, lenders were required to consider an applicant to have an adverse credit
history if the applicant was 90 days or more delinquent on a debt payment; or if, within the past
five years, the applicant “has been the subject of a default determination, bankruptcy discharge, ¹²
foreclosure, repossession, tax lien, wage garnishment, or write-off of a Title IV debt.”
Regulations have also required lenders to retain a record of the basis for determining that
extenuating circumstances existed for any borrower, such as an updated credit report, or
documentation from the creditor that the borrower has made satisfactory arrangements to repay ¹³
the debt.
The ECASLA and the HEOA amended the HEA to specify certain extenuating circumstances
under which eligible lenders may make PLUS Loans to individuals who otherwise would have
been determined to have adverse credit histories. With respect to loans for which the first
disbursement is made on or after July 1, 2008, lenders may determine that extenuating
circumstances exist, if during the period from January 1, 2007, through December 31, 2009, an
applicant is no more than 180 days delinquent on mortgage payments for a primary residence or
on medical bills.
A student’s dependency status and grade level, demonstration of financial need, and the cost of ¹⁴
attendance (COA) of the school attended affect eligibility to borrow particular types of loans,
the amount that may be borrowed, and the applicable interest rate. These factors are briefly
discussed below.
A student’s dependency status and grade level determine the types of loans available to be
borrowed and limit the amount that may be borrowed. Dependency status is determined by a
student’s responses to questions on the Free Application for Federal Student Aid (FAFSA), which
is completed and submitted to ED by students applying for federal student aid. A student is
deemed to be independent of his parents’ support if the student
¹²
^{34 C}^.^F.R^.^§^§⁶⁸²^.²⁰¹⁽^c⁾⁽²⁾⁽ⁱⁱ⁾^aⁿ^{d 6}^85.²⁰⁰⁽^c⁾⁽²⁾⁽^vⁱⁱ⁾^.
¹³^{34 C}^.^F.R^.^§⁶⁸^2.²⁰¹⁽^c⁾⁽²⁾⁽^v⁾^.
¹⁴^C^o^s^t^of^a^tte^nda^nc^e^is^de^fⁱ^ne^{d a}^t^H^E^A^,^{§ 47}^{2. I}^t^g^e^ne^r^a^ll^y^inc^l^ude^s^tuiti^on^aⁿ^d^f^e^e^s^{, a}ⁿ^a^llow^a^nc^e^f^o^r^bo^ok^s^,^s^u^p^p^lie^s
^a^{nd tr}^aⁿ^s^por^ta^ti^on^{, r}^o^om^a^{nd b}^o^a^r^{d, a}ⁿ^{d o}^t^he^r^e^x^pe^ns^e^s^r^e^la^te^{d to}^s^c^hool^a^tte^nda^nc^e^.

• is 24 years of age or older by December 31 of the award year;
• is an orphan or ward of the court or was a ward of the court until the individual ¹⁵
reached the age of 18;
• is a veteran of the Armed Forces of the United States or is currently serving on
active duty in the Armed Forces for other than training purposes;
• is a graduate or professional student;
• is a married individual;
• has legal dependents other than a spouse; or
• is a student for whom a financial aid administrator makes a documented ¹⁶
determination of independence by reason of other unusual circumstances.
• Grade level is based on student progression according to the academic standards
of the school the student attends. For undergraduate students, progression to a
higher grade level for purposes of awarding Stafford Loans does not necessarily
correspond to the start of a new academic year. For instance, a student who
continues to make satisfactory academic progress, but does not progress to the
next grade level could, for instance, receive Stafford Loans more than once as a
first-year student. Once the student accrues enough credits to progress to the next
higher grade level, the student would become eligible for the higher borrowing
limits available to second-year students. To be eligible to borrow Stafford Loans
or PLUS Loans as a graduate student, an individual must be enrolled in a
program above the baccalaureate level or one that leads to a first professional
degree, must have completed at least three years of full-time study at an IHE, and ¹⁷
must not be concurrently receiving Title IV aid as an undergraduate student.
• Dependency status and grade level are important because they determine the type
of borrowing available to students and their families, which in turn affects the
borrowing limits (discussed below) available to them. Of particular importance
with regard to undergraduate students is the fact that PLUS Loans—the loans
with the most flexible borrowing limits—are only available to the parents of
dependent students. At the same time, undergraduate independent students are ¹⁸
extended higher personal borrowing limits than dependent students. The
¹⁵
^E^f^f^ectⁱ^v^{e Ju}^l^y¹^,²⁰⁰⁹^,^t^hⁱ^s^p^r^o^vⁱ^sⁱ^oⁿⁱ^s^revi^sed^t^o^“i^{s an}^o^r^ph^an^,ⁱⁿ^f^o^st^{er care,}^o^r^{a w}^a^rd^o^f^t^h^{e co}^u^r^t^,^at^an^y^tⁱ^m^e
^w^h^eⁿ^theⁱⁿ^divⁱ^dua^l^is¹³^y^e^a^r^s^o^f^a^g^e^or^olde^r^.^”^A^dditⁱ^oⁿ^a^lly^{, ef}^f^e^ctiv^e^J^u^ly^{1, 200}^{9 a}^s^t^udeⁿ^t^m^a^y^a^l^s^o^be^de^e^m^e^d^to
^beⁱⁿ^de^peⁿ^d^eⁿ^t^up^{on m}^e^e^ting^the^f^o^llowⁱ^ng^c^r^ite^ria^:^{is a}ⁿ^e^m^aⁿ^cⁱ^pa^te^{d m}ⁱ^{nor or}^{is in}^le^g^a^{l g}^u^a^r^diaⁿ^{ship a}^s^de^te^rm^ine^d
^b^y^{a co}^u^r^t^o^f^co^m^p^et^en^t^j^u^ri^sdⁱ^c^tⁱ^oⁿⁱⁿ^t^h^{e i}ⁿ^dⁱ^vi^du^al^{’s S}^t^at^{e o}^f^l^e^gal^resi^d^eⁿ^ce;^o^r^h^a^{s b}^een^veri^fⁱ^ed^{as an}
^uⁿ^acco^m^p^anⁱ^e^d^y^o^u^t^h^w^h^oⁱ^s^a^h^o^mel^e^{ss ch}ⁱ^l^d^o^r^y^o^u^t^{h as d}^e^fⁱⁿ^e^d^b^y^t^h^{e M}^c^Kiⁿⁿ^e^y^-^V^eⁿ^t^o^Ho^m^e^l^e^s^s^A^ssi^st^an^ce^A^c^t^,
^o^r^{at risk o}^f^h^o^m^elessn^ess.
¹⁶^H^E^A^,^{§ 48}⁰⁽^d)^{; (}²^{0 U}^.^S^.^C^.^{§ 1}⁰⁸⁷^v^v⁽^d)⁾^.^Ef^f^e^c^tiv^e^J^u^l^y^{1, 20}^09,^a^fⁱ^na^nc^ia^{l a}ⁱ^{d a}^d^mⁱ^nis^t^r^a^tor^m^a^y^a^l^s^o^m^a^k^e^a
^de^te^r^m^ina^{tion of}ⁱⁿ^de^peⁿ^d^eⁿ^c^e^ba^s^e^{d up}^on^a^doc^um^eⁿ^te^{d de}^te^r^m^ina^tion^of^inde^pe^nde^nc^e^t^h^a^t^w^a^s^pr^e^v^ious^ly^m^a^de^by
^a^nothe^r^fⁱ^na^nc^ia^{l a}ⁱ^{d a}^d^mⁱ^nis^t^r^a^to^r^{in t}^h^e^s^a^m^e^aw^a^r^d^y^e^a^r^.
¹⁷^{34 C}^F^R^§⁶^82.²⁰⁰⁽^b)^.
¹⁸^D^e^pe^nde^nt^u^nde^r^g^r^a^dua^te^s^m^a^y^be^e^lig^ible^to^b^o^r^r^o^w^Sta^f^f^o^r^d^L^o^aⁿ^{s up}^to^the^la^rg^e^r^c^o^m^b^ine^d^Sta^f^f^o^{rd L}^o^aⁿ^lim^its
^a^v^a^ila^ble^{to in}^de^peⁿ^d^eⁿ^t^un^de^rg^ra^dua^te^stu^d^eⁿ^{ts (}^d^ispla^y^e^dⁱⁿ^Ta^b^l^{e 1}^{) i}ⁿⁱⁿ^st^an^{ces w}^h^{ere a f}ⁱⁿ^aⁿ^cⁱ^a^l^ai^d^ad^mⁱⁿⁱ^st^rat^o^r
^d^e^t^e^rmⁱⁿ^{es t}^h^at^t^h^ei^{r p}^a^ren^t^(s)ⁱ^s^uⁿ^a^b^l^{e t}^o^b^o^r^r^o^w^P^L^US^L^o^an^{s due t}^o^cert^aⁱⁿ^excep^tⁱ^oⁿ^a^l^ci^rcu^m^st^aⁿ^ces.^E^x^cep^tⁱ^oⁿ^a^l
^cⁱ^r^c^um^s^t^aⁿ^c^e^s^m^a^y^a^pply^{in ins}^t^aⁿ^c^e^s^of^a^s^t^ude^{nt w}^hos^e^pa^r^e^nt^is^una^ble^t^o^qua^lif^y^{to bor}^r^o^w^P^L^U^S^L^o^aⁿ^s^due^t^o^aⁿ
^a^d^v^e^r^s^e^c^r^e^d^{it his}^t^or^y^,^w^hos^e^pa^r^e^nt’^s^oⁿ^ly^inc^o^m^e^is^f^r^om^public^a^s^sⁱ^s^t^aⁿ^c^e^or^dis^a^bil^ity^be^ne^f^its^,^w^hos^e^pa^r^e^nt^is
^inc^a^r^c^e^r^a^t^e^d^{, w}^hos^e^pa^re^nt’s^w^h^ere^a^bouts^a^r^e^uⁿ^k^now^n,^{or w}^hos^e^pa^re^{nt is}^{not a}^U^.^{S. c}^itiz^eⁿ^or^pe^r^m^aⁿ^eⁿ^{t re}^sⁱ^de^nt.

operating assumption is that students and their parents will borrow to finance the
postsecondary education expenses of dependent students, whereas, independent
students will be financing their expenses without parental assistance. The types
of loans available to undergraduate students and their families align with this
assumption.
• Graduate students, all of whom are independent, are extended the highest
personal borrowing limits of any students. In addition to being able to borrow
both Subsidized Stafford Loans and Unsubsidized Stafford Loans, graduate
students are also eligible to borrow PLUS Loans, provided that they do not have
an adverse credit history.
• Dependency status also determines which set of income and assets is included in
need analysis calculations (discussed below). Need analysis calculations for
dependent students are based on the income and assets of both the student and the ¹⁹
student’s parents, whereas need analysis calculations for independent students
are based on the student’s (and if applicable, the student’s spouse’s) income and
assets.
Although dependency status and grade level determine the types of loans and loan limits that
generally may be made available to students, federal student aid need analysis procedures
determine specific amounts that individuals may borrow in need-based Subsidized Stafford
Loans, up to annual loan limits (described below).
Subsidized Stafford Loans. Applicants seeking to borrow Subsidized Stafford Loans must
undergo a “need test” through which the expected family contribution to be made by the student
and the student’s family toward paying college expenses is determined based on the financial
resources available to the student. According to federal student aid need analysis procedures, the
student’s EFC is calculated and subtracted from the estimated COA of the institution the student
attends to determine the amount of need-based financial aid that an applicant is eligible to
receive. Additional calculations are then performed to determine the composition of the student’s
federal student aid package. For instance, undergraduate students must receive a determination of
their eligibility to receive a Federal Pell Grant (a form of need-based aid available only to
undergraduates) prior to being certified by their school as being eligible to borrow a Stafford
Loan. This is designed to first provide maximum grant aid to needy students before they incur
student loan debt.
Separate calculations are performed to determine the mix of Subsidized Stafford Loan aid and
Unsubsidized Stafford Loan aid that an applicant is eligible to receive. To determine the
maximum Subsidized Stafford Loan amount a student is eligible to borrow (up to applicable
annual loan limits), the student’s EFC is summed with estimated financial assistance from other
sources (EFA), and this total is subtracted from the estimated COA. This calculation is shown
below:
Subsidized Stafford Loan eligibility = COA-(EFC + EFA)
¹⁹
^P^a^r^e^nta^l^inc^o^m^e^a^{nd a}^s^s^e^ts^c^aⁿ^be^de^fⁱ^ne^{d in a}^v^a^rⁱ^e^t^y^of^w^a^y^s^{in c}^a^s^e^s^w^h^e^r^e^a^s^t^ude^nt’^s^pa^r^e^nts^a^r^e^not^m^a^r^rⁱ^e^d^to
^each^o^t^h^e^r.^S^{ee t}^h^{e F}^r^{ee A}^p^p^lⁱ^catⁱ^oⁿ^f^o^{r F}^e^d^e^ral^S^t^ud^en^t^Aⁱ^d^(F^A^F^S^A⁾^f^o^{r ad}^dⁱ^tⁱ^oⁿ^a^lⁱⁿ^f^o^rm^atⁱ^oⁿ^.

The student’s EFA is comprised of any aid provided under the Federal Pell Grant, Academic
Competitiveness (AC) Grant, National Science and Mathematics Access to Retain Talent
(SMART) Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal
Perkins Loan, and Federal Work-Study (FWS) programs; veterans’ education benefits (other than ²⁰
benefits received under the Montgomery G.I. Bill—Active Duty (MGIB-AD) program; and
other scholarship, grant, or loan assistance (other than national service education awards provided
under Title I of the National and Community Service Act of 1990). The result of this calculation
is the amount which may be borrowed through a Subsidized Stafford Loan.
Unsubsidized Stafford Loans. Unsubsidized Stafford Loans are non-need-based loans. Students
are eligible to borrow Unsubsidized Stafford Loans irrespective of their EFC in amounts up to the
annual total Stafford Loan limit, less any amount borrowed through a Subsidized Stafford Loan.
The amount students may borrow in Unsubsidized Stafford Loans is limited to the lesser of (1)
the result subtracting the student’s EFA (including any amount borrowed through a Subsidized
Stafford Loan) from COA, or (2) the result of subtracting the amount borrowed through a
Subsidized Stafford Loan from the annual total Stafford Loan limit. This calculation is shown
below:
Unsubsidized Stafford Loan eligibility =
min[(COA-EFA),(total Stafford Loan Limit-Subsidized Stafford Loan amount)]
PLUS Loans. Like Unsubsidized Stafford Loans, PLUS Loans are non-need-based loans.
Graduate and professional students and parents of dependent undergraduate students may borrow
PLUS Loans irrespective of their EFC. The amount that may be borrowed in PLUS Loans is
limited to the result of subtracting the EFA (including any amount borrowed through Stafford
Loans) of the student on whose behalf the loan is being made, from COA. The calculation for
determining PLUS Loan eligibility is shown below:
PLUS Loan eligibility = COA-EFA
For dependent undergraduate students, the total PLUS Loan eligibility amount may be borrowed
by one parent, or it may be divided among more than one parent (including non-custodial parents)
and borrowed separately. In general, it is not necessary that students complete a Free Application
for Federal Student Aid (FAFSA) for their parents to be eligible to borrow parent PLUS Loans on
their behalf. Graduate and professional students, however, are required to complete a FAFSA as a
condition for becoming eligible to borrow PLUS Loans.
Separate annual borrowing limits apply to the amount that students may borrow through
Subsidized Stafford Loans and the total amount that students may borrow through Subsidized
Stafford Loans and Unsubsidized Stafford Loans, combined. There is no specified limit to the
amount that may be borrowed through PLUS Loans. Annual loan limits apply to the maximum
principal amount that may be borrowed; and any fees that the borrower is required to pay
²⁰
^Eff^e^c^tive^July^{1, 201}^{0, a}^l^l^f^o^rm^s^of^v^e^te^ra^{ns’ e}^duc^a^ti^{on be}^ne^f^its^w^{ill be}^e^x^c^l^ude^d^f^r^om^be^ing^tre^a^t^e^d^a^s^EFA^.

(described below) are included in the amount subject to these limits. Borrowing limits for
Stafford Loans vary by borrower dependency status and grade level.
For students enrolled for less than one year, borrowing limits are prorated based on the fraction of
the academic year for which they are enrolled. An “academic year” is defined in statute as a
minimum of 30 weeks of instruction for courses of study measured in credit hours, or 26 weeks of
instruction for courses of study measured in clock hours; and during which a full-time student is
expected to complete a minimum of 24 semester or trimester hours, 36 quarter hours, or 900
clock hours.
Limits are also placed on the total amount of outstanding Stafford Loan debt (i.e., unpaid
principal) that undergraduate, graduate, and professional students may accrue. For each borrower
type, one limit applies to the total amount that may be borrowed in Subsidized Stafford Loans and
another limit applies to the total amount that may be borrowed in Subsidized Stafford Loans and
Unsubsidized Stafford Loans, combined. No aggregate limits, however, are placed on PLUS
Loans.
Annual and aggregate loan limits applicable to most borrowers, by borrower dependency status
and grade level, are presented in Table 1 for Subsidized Stafford Loans, total Stafford Loans (i.e.,
Subsidized Stafford Loans and Unsubsidized Stafford Loans, combined), and PLUS Loans. As
described above, the amount that may be borrowed through Subsidized Stafford Loans is also
limited to the amount of a student’s financial need as determined by need analysis procedures;
and the amounts that may be borrowed through total Stafford Loans and PLUS Loans are limited ²¹
to the difference between the student’s cost of attendance and estimated financial assistance.
Table 1. Annual and Aggregate Loan Limits for
Borrowers of Stafford Loans and PLUS Loans,
by Dependency Status and Grade Level
^Borro^wer^{Total Subsidized &}^PLUS
^{Dependency Status}^Subsidized^Unsubsidized^Loans
^{and Gra}^{de Level}^{Stafford L}^{oans (}^$)^{Stafford L}^{oans (}^$)^($)
^{Dependent Undergrad}^uate
^{Annual loan limits}
¹^st^year^3,50⁰^5,50⁰^n.a.
²^nd^year^4,50⁰^6,50⁰^n.a.
³^rd^{year a}^{nd above}^5,50⁰^7,50⁰^n.a.
^{Aggregate loan limits}^a
^All^23,0⁰⁰^31,0⁰⁰^n.a.
^{Independent Underg}^radu^ate^a
²¹
^Iⁿ^a^d^diti^on,^r^e^cⁱ^pieⁿ^ts^of^T^E^A^C^H^G^r^aⁿ^ts^w^{ho f}^a^{il to m}^e^e^t^the^r^e^quir^e^m^e^nts^of^the^pr^og^r^a^m^m^a^y^be^r^e^quir^e^d^{to r}^e^pa^y
^the^a^m^{ount of}^theⁱ^r^T^E^A^C^H^G^r^aⁿ^{t a}^w^a^r^{d in the}^f^o^r^m^of^aⁿ^Uⁿ^s^ubsⁱ^d^iz^e^d^Sta^f^f^o^r^d^L^o^aⁿ^{. For}^s^u^c^hⁱⁿ^dⁱ^vⁱ^dua^ls^{, t}^h^is
^Uⁿ^s^ubsⁱ^d^iz^e^d^Sta^f^f^o^r^d^L^o^aⁿ^a^m^o^unt^is^de^te^r^m^ine^d^s^e^pa^r^a^te^l^y^f^r^o^m^othe^r^w^is^e^a^pplic^a^b^le^aⁿ^nua^l^bor^r^o^wⁱ^ng^lim^its^.

^Borro^wer^{Total Subsidized &}^PLUS
^{Dependency Status}^Subsidized^Unsubsidized^Loans
^{and Gra}^{de Level}^{Stafford L}^{oans (}^$)^{Stafford L}^{oans (}^$)^($)
^{Annual loan limits}
¹^st^year^3,50⁰^9,50⁰^n.a.
²^nd^year^4,50⁰^10,5⁰⁰^n.a.
³^rd^{year a}^{nd above}^5,50⁰^12,5⁰⁰^n.a.
^{Aggregate loan limits}^a
^All^23,0⁰⁰^57,5⁰⁰^n.a.
^{Independent Gradu}^{ate and P}^rofessional
^{Annual loan limits}
^{In ge}^neral^8,50⁰^20,5⁰⁰^{Up to COA-EFA}^b
^{Aggregate loan limits}^d
^{In ge}^neral^65,0⁰⁰^138,⁵⁰⁰^{Not limited}^b
^{Parents of Dependent Under}^gradu^{ate Students}
^{Annual loan limits}
^{All borrowers}^n.a.^n.a.^{Up to COA-EFA}^b
^{Aggregate loan limits}
^{All borrowers}^n.a.^n.a.^{Not limited}^b
^Sources:^H^{EA, §§ 428 a}^{nd 4}^28H^{; 34 CFR 6}^82.2^{04; a}^{nd Departm}^e^{nt of Edu}^{cation, Office of Postsec}^{ondary Education,}
^{Dear Colleague Letters G}^EN-0^5-^{09, G}^EN-0^8-0^{4, and G}^EN-0^8-0^8.
^Note:^{“n.a.” means not applicable.}
^a.^{Accrued inte}^{rest and oth}^{er c}^harg^{es that}^{have not}^been^{capitalized do not count toward aggregate l}^oan
^limits.^{Stafford Loans that}^{have b}^{een included in Consolidation Lo}^{ans are att}^{ributed to t}^{he aggregat}^{e limits}
^{for Subsidized Stafford Loans and}^{Total Stafford Loans according to their proportionate amou}^{nt of}^the
^Consolidat^{ion Loan.}
^b.^{These loan limits also apply to dependent}^u^ndergraduate^studen^ts^{whose pare}^{nts a}^{re u}^{nable to obt}^{ain PLUS}
^Loans.
^c.^{There is no stat}^{utory bor}^{rowing limit for PLUS Loans; however, borrowers must}^{be c}^{redit-worthy.}
^d.^{Accrued inte}^{rest and oth}^{er c}^harg^{es that}^{have not}^been^{capitalized do not count toward aggregate l}^oan
^limits.^{Stafford Loans that}^{have b}^{een included in Consolidation Lo}^{ans are att}^{ributed to t}^{he aggregat}^{e limits}
^{for Subsidized Stafford Loans and}^{Total Stafford Loans according to their proportionate amou}^{nt of}^the
^Consolidat^{ion Loan. Loan limits f}^{or graduate and}^{professional stud}^{ents include amou}^nts^{borrowed f}^or
^undergrad^{uate loans.}
A comprehensive listing of currently applicable annual and aggregate loan limits for all types of
borrowers (including borrowers with special circumstances), by dependency status and grade
level is presented in Error! Reference source not found.(see Appendix B). Historical listings of
annual and aggregate loan limits is presented in Table and Table B-3, respectively (see
Appendix B).

The interest rates applicable to Stafford Loans are established by statute.²² Applicable interest
rates have changed numerous times throughout the history of the federal student loan programs,
including changes between fixed interest rates and variable interest rate formulas. This section
discusses the interest rates that are applicable to the majority of loans currently in repayment,
loans that are currently being disbursed, and loans to be disbursed in future years.
Stafford Loans disbursed on or after October 1, 1992 and before July 1, 2006 are variable rate ²³
loans, on which rates adjust annually. The formula used to calculate the variable interest rate for
these loans, many of which are still outstanding, is determined by statute and stays in effect from
the time the loan is disbursed through the life of the loan (provided that the loan is not ²⁴
consolidated into a fixed-rate Consolidation Loan). The rates for these Stafford Loans are
determined every June 1, and become effective July 1 for the following 12-month period. The
variable rate is calculated based upon the bond equivalent rate of the 91-day Treasury bill, plus a ²⁵
premium which differs depending on whether the borrower is in school, or in repayment. For
loans made from July 1, 1998, through June 30, 2006, the borrower interest rate is based on the

91-day Treasury bill plus 1.7 percentage points for borrowers who are in school; and the 91-day ²⁶

Treasury bill plus 2.3 percentage points for borrowers who are in repayment. The maximum
interest rate that may apply to Stafford Loans disbursed during this period is capped at 8.25%.
Stafford Loans for which the first disbursement is made on or after July 1, 2006, are fixed interest
rate loans. For all Subsidized Stafford Loans and Unsubsidized Stafford Loans disbursed on or
after July 1, 2006, and before July 1, 2008, a 6.8% interest rate applies. Lower fixed interest rates
apply to Subsidized Stafford Loans made to undergraduate students on or after July 1, 2008, and
before July 1, 2012. During this period, the 6.8% fixed interest rate continues to apply to
Subsidized Stafford Loans to graduate and professional students, and to all Unsubsidized Stafford
Loans. Also, under current law, the 6.8% fixed interest rate will apply to all Stafford Loans
disbursed on or after July 1, 2012. Interest rates on Stafford Loans first disbursed on or after July

1, 2006 are presented in Table 2.

²²
^T^h^{ese i}ⁿ^t^e^rest^rat^e^{s are}^m^a^xi^m^u^m^au^t^h^o^rⁱ^zed^rat^e^s.^T^h^{e st}^at^u^t^o^r^y^rat^e^{s are gen}^e^r^a^l^l^y^t^h^{e rat}^e^{s ch}^arg^e^d^t^o^b^o^r^r^o^w^e^rs,
^al^t^h^ou^gh^l^e^nd^er^{s m}^a^y^vo^l^uⁿ^t^arⁱ^l^y^make^loaⁿ^{s w}^{ith low}^e^r^inte^re^{st ra}^t^e^s.
²³^For^a^l^l^Sta^f^f^o^r^d^L^o^aⁿ^s^fⁱ^r^s^{t dis}^b^u^r^s^e^{d on}^or^a^f^te^r^J^u^ly^1,¹⁹⁹⁴^{, t}^h^e^a^pplic^a^b^leⁱⁿ^te^re^{st ra}^te^{, a}ⁿ^d^w^h^e^t^he^{r the}^ra^te^is
^fⁱ^xe^{d or}^v^a^rⁱ^a^b^le^{, de}^pe^nds^on^the^da^te^the^fⁱ^r^s^{t dis}^b^ur^s^e^m^e^{nt of}^a^bor^r^o^w^e^r^’^s^loaⁿ^is^m^a^de^{. P}^r^e^v^ious^ly^{, a}^ppl^ic^a^b^le
^inte^re^{st ra}^te^{s de}^peⁿ^d^e^d^la^rg^e^l^y^{on w}^h^e^t^he^{r a}^borrow^e^{r ha}^d^outstaⁿ^dⁱ^ng^loaⁿ^{s a}^t^the^tim^e^of^borrowⁱ^ng^aⁿ^a^d^d^itio^na^l
^loaⁿ^.
²⁴^If^{a vari}^ab^l^e^rat^e^l^o^anⁱ^s^coⁿ^s^olⁱ^d^at^edⁱⁿ^t^o^{a n}^e^w^Coⁿ^s^olⁱ^d^atⁱ^oⁿ^L^o^an^,^t^h^{e i}ⁿ^t^e^rest^rat^e^b^eco^m^e^{s f}ⁱ^xe^d^.^A^t^p^r^esen^t^,^t^h^e
^inte^re^{st ra}^te^on^Co^nsoli^d^a^tio^{n L}^o^aⁿ^{s is the}^w^e^ig^hte^d^a^v^e^r^a^g^e^o^f^the^inte^re^{st ra}^te^{s in e}^f^fe^c^t^{on the}^un^de^r^l^yⁱ^ng^loaⁿ^s^,^a^t^the
^tim^e^o^f^c^ons^oli^d^a^tio^{n, r}^o^u^nde^d^u^p^{to t}^h^e^ne^a^r^e^s^{t hig}^h^e^r^one^-^e^ig^ht^h^of^1%^{, a}^{nd c}^a^p^pe^{d a}^t^8.2⁵^%^.^P^r^e^v^ious^ly^{, othe}^r^r^a^te
^se^tting^f^o^r^m^ula^s^a^pplie^d^{to C}^ons^o^lida^tio^{n L}^o^aⁿ^{s (Se}^e^Ta^b^l^eⁱⁿ^A^p^pe^nd^ix^B^).
²⁵^Inte^re^{st ra}^te^{s a}^r^e^a^d^juste^d^aⁿ^nua^ll^y^ba^s^e^{d on}^the^bo^{nd e}^quiv^a^le^{nt ra}^te^of^the⁹¹^-da^y^T^r^e^a^s^ur^y^{bill a}^t^t^h^e^fⁱ^na^{l a}^u^c^tion
^he^ld^pr^ior^{to J}^une^1.
²⁶^A^dⁱ^ff^er^en^tⁱ^a^l^rat^eⁱ^s^p^r^o^vⁱ^d^ed^f^o^r^t^h^o^s^{e i}ⁿ^scho^o^l^aⁿ^dⁱⁿ^re^p^a^ymen^t^b^ecau^{se l}^o^an^servi^cⁱⁿ^{g co}^st^{s are l}^o^w^e^{r d}^u^rⁱⁿ^{g t}^h^e
^in-^s^c^h^o^o^l^pe^rⁱ^od^{, w}^h^eⁿⁿ^o^pa^y^m^ents^a^r^e^r^e^quir^e^d.

Table 2. Stafford Loan Interest Rates
^{Fixed Inter}^{est Rate in Effect}
^{Disbursement Period}^Subsidized^Unsubsidized
^{Stafford L}^oans^{Stafford L}^oans
^{July 1, 2}⁰⁰^6-Ju^ne^{30, 2}⁰⁰⁸
^{Undergraduate}^student^s^6.8^6.8
^{Graduate a}^{nd p}^{rofessional stude}^nts^6.8^6.8
^{July 1, 2}⁰⁰^8-Ju^ne^{30, 2}⁰⁰⁹
^{Undergraduate}^student^s^6.0^6.8
^{Graduate a}^{nd p}^{rofessional stude}^nts^6.8^6.8
^{July 1, 2}⁰⁰^9-Ju^ne^{30, 2}⁰¹⁰
^{Undergraduate}^student^s^5.6^6.8
^{Graduate a}^{nd p}^{rofessional stude}^nts^6.8^6.8
^{July 1, 2}⁰¹^0-Ju^ne^{30, 2}⁰¹¹
^{Undergraduate}^student^s^4.5^6.8
^{Graduate a}^{nd p}^{rofessional stude}^nts^6.8^6.8
^{July 1, 2}⁰¹^1-Ju^ne^{30, 2}⁰¹²
^{Undergraduate}^student^s^3.4^6.8
^{Graduate a}^{nd p}^{rofessional stude}^nts^6.8^6.8
^{On or afte}^{r J}^{uly 1, 2}⁰¹²
^{Undergraduate}^student^s^6.8^6.8
^{Graduate a}^{nd p}^{rofessional stude}^nts^6.8^6.8
^Source:^H^{EA §§ 427A,}⁴²^{8, and}⁴⁵⁵⁽^{b); (20 U.S.C. §§ 1077a, 1}⁰⁷⁸^{and 1}⁰⁸^7e(b)).
A history of Stafford Loan interest rates and interest rate formulas that have been in effect since
the initial GSL program was launched in 1965 is presented in Table (see Appendix B). A history
of the actual interest rates in effect on fixed rate and variable rate Stafford Loans, by borrower
cohort, for the period from 1992-1993 onward is presented in Table B-5 Error! Reference source
not found.(see Appendix B).
PLUS Loans disbursed from the time of their introduction in 1981, through June 30, 1987, are
fixed interest rate loans. Those disbursed on or after July 1, 1987, and before July 1, 2006, are
variable rate loans, on which rates adjust annually. The formula used to calculate the variable
interest rate for these PLUS Loans is specified in statute and stays in effect from the time the loan
is disbursed through the life of the loan (provided that the loan is not consolidated into a fixed-
rate Consolidation Loan). Interest rates on PLUS Loans are determined every June 1, and become ²⁷
effective July 1 for the following 12-month period. The interest rate formula for “new” PLUS
²⁷
^For^P^L^{US L}^o^aⁿ^{s w}^{ith a}^T^r^e^a^s^ur^y^billⁱⁿ^de^x^,^ra^te^{s a}^r^e^a^d^juste^d^aⁿⁿ^u^a^lly^ba^se^{d on t}^h^e^b^oⁿ^d^e^q^uiv^a^le^{nt ra}^te^of^the
^T^r^e^a^sur^y^{bill a}^t^t^h^e^fⁱ^na^{l a}^u^c^tio^{n h}^e^{ld pri}^o^{r t}^o^Ju^ne^1.^F^o^{r lo}^aⁿ^{s ba}^se^{d o}ⁿ^t^h^e^oⁿ^e^-^y^e^a^r^c^onsta^{nt m}^a^turity^T^r^e^a^sur^y^yⁱ^e^l^d,
⁽^c^onti^nue^d.^..)

loans disbursed from July 1, 1998, through June 30, 2006, is the bond equivalent rate of the 91-
day Treasury bill plus a premium of 3.1 percentage points, capped at 9%.
PLUS Loans disbursed on or after July 1, 2006 are fixed rate loans. Those made under the DL
program have a fixed interest rate of 7.9%, while those made under the FFEL program have a ^th
fixed interest rate of 8.5%. In the 107 Congress, a fixed interest rate of 7.9% was established
prospectively for PLUS loans disbursed on or after July 1, 2006 under both the FFEL and DL ²⁸²⁹
programs. Under the Higher Education Reconciliation Act (HERA), the interest rate for PLUS
Loans made under the FFEL program—but not those made under the DL program—was ³⁰
increased to 8.5% before the 7.9% interest rate would have gone into effect. The 7.9% interest
rate for DL program PLUS Loans remains in effect.
A history of PLUS Loan interest rates and interest rate formulas is presented in Table (see
Appendix B). The actual interest rates in effect on fixed rate and variable rate PLUS Loans, by
borrower cohort, for the period from 1992-1993 onward are presented in Table (see Appendix
B).
In addition to being responsible for repaying loan principal and interest, borrowers of Stafford
Loans and PLUS Loans are responsible for paying loan origination fees and default fees. (These
previously had been referred to as loan insurance fees.) These borrower fees help offset federal
subsidy costs. In essence, these fees pass along some of the federal cost of insuring and
subsidizing loans to the borrowers.
Loan origination fees are calculated as a proportion of the loan principal borrowed and are
deducted proportionately from each disbursement of the loan proceeds to the borrower. (The
principal amount borrowed is often referred to as the gross disbursement amount; and the amount
the borrower actually receives, after the deduction of borrower fees, to be applied toward
education expenses is often referred to as the net disbursement amount.) Under the FFEL
program, for Stafford Loans and PLUS Loans for which the first disbursement was made on or
after July 1, 1994, and before July 1, 2006, the origination fee was limited to not more than 3%.
In addition, during that period in the FFEL program, guaranty agencies could assess a loan
insurance premium of not more than 1% on Stafford Loans and PLUS Loans. In the DL program,
borrowers paid a 4% origination fee to the federal government until ED reduced the origination ³¹
fees for Stafford Loans to 3%, effective August 15, 1999.

^(...c^on^tin^ue^d)
^t^h^{e rat}^e^{s are ad}^j^u^st^ed^ann^u^a^l^l^y^b^a^sed^oⁿ^t^h^{e w}^eekl^y^aver^{age o}ⁿ^e^-^y^e^a^{r co}ⁿ^s^t^aⁿ^t^m^a^t^u^ri^t^y^T^r^easu^r^y^yⁱ^el^d^,^{as pu}^b^lⁱ^s^h^e^d^b^y
^the^B^o^a^r^d^of^G^o^v^e^r^nor^s^of^the^Fe^de^r^a^{l R}^e^s^e^r^v^e^S^y^s^t^em^f^o^r^the^la^s^t^c^a^l^e^nda^r^w^e^ek^e^nding^be^f^o^r^e^J^une^26.
²⁸^T^h^is^pr^ov^is^io^{n w}^a^s^eⁿ^a^c^t^e^d^unde^r^P^.^L^.¹⁰^7-¹³⁹^.
²⁹^T^h^e^H^E^RA^w^a^s^eⁿ^a^c^t^e^d^a^s^T^itle^V^III,^Su^btitle^A^of^P.L^.¹⁰^9-1⁷¹^,^the^D^e^fⁱ^c^{it Re}^duc^tion^A^c^{t of}²⁰⁰⁵^{. For}^a^ddi^tio^na^l
^inf^o^r^m^a^{tion on s}^t^ude^{nt l}^o^aⁿ^pr^ovⁱ^s^ions^eⁿ^a^c^t^e^d^un^de^r^the^H^E^R^A^{, s}^e^e^C^R^S^R^e^por^{t R}^S²²³⁰^8,^St^udeⁿ^t^Lo^ans^an^{d FY}²⁰⁰⁶
^Bud^g^e^t^Re^c^onc^il^iati^on^{, by}^A^d^am^Stoll^.
³⁰^{It is g}^e^ne^ra^lly^a^c^c^e^p^te^{d tha}^t^a^dra^f^ting^e^{rror le}^{d to}^the^di^f^f^e^r^e^ntia^{l inte}^re^{st ra}^te^{s in t}^h^e^fⁱ^na^{l re}^c^onc^ilia^tion^m^e^a^s^ure^,
^a^{nd t}^h^a^t^aⁿ^8.5%^ra^te^w^a^{s inte}^nde^{d f}^o^{r b}^o^th^prog^ra^m^s^{. Se}^e^“^B^{ill Woul}^{d Re}^pe^a^l^L^o^aⁿ^P^r^ov^ision^,^”^Chroⁿⁱ^cl^{e o}^f^Hi^gh^er
^Educ^a^tio^n,^J^une²³^,²⁰⁰⁶^{, f}^o^r^de^t^a^ils^.
³¹^Se^e^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^{n, O}^f^fⁱ^ce^of^Fe^de^r^a^{l Stude}ⁿ^t^Aⁱ^d,^Dⁱ^r^e^c^t^L^o^aⁿ^B^u^lle^tin^{, “}^R^e^duc^ti^on^{in t}^h^e^L^o^aⁿ
^O^r^ig^ina^tion^Fe^e^f^o^r^Dⁱ^r^e^c^t^L^o^aⁿ^B^o^r^r^o^w^e^r^s^,”^D^L^B^99-^{36, J}^une^16,¹⁹^99,^a^t^h^ttp:/^/w^w^w^.if^a^p.e^d^.g^ov^/dlb^ulle^ti^ns^/
⁽^c^onti^nue^d.^..)

Changes to borrower fees were enacted under the HERA for FFEL and DL program loans. Under
the FFEL program, all loans disbursed on or after July 1, 2006, are subject to a default fee of up
to 1%, which replaces the 1% insurance premium. The origination fee on FFEL program Stafford
Loans was reduced to 2% on loans for which the first disbursement was made on or after July 1,
2006, and before July 1, 2007. For subsequent years, the origination fee is reduced by 0.5
percentage point per year, until being phased out for loans first disbursed on or after July 1, 2010.
The origination fee for FFEL program PLUS Loans remains at 3%. The HERA also established
origination fees for DL program loans in statute. For DL program Stafford Loans, a 3%
origination fee was specified for Stafford Loans for which the first disbursement was made on or
after July 1, 2006, and before July 1, 2007. The DL program Stafford Loan origination fee is
reduced by 0.5 percentage points each subsequent year, until it reaches 1% for Stafford Loans
disbursed on or after July 1, 2010. The origination fee for DL program PLUS Loans remains at
4%. Borrower fees on FFEL and DL program Stafford Loans and PLUS Loans disbursed on or
after July 1, 2006 are presented in Table 3. Historical borrower fees on Stafford Loans and PLUS
Loans are presented in Table B-8 (see Appendix B).
Table 3. Borrower Fees on Stafford Loans and PLUS Loans, by Loan Program: Loans
Disbursed On or After July 1, 2006
^{Ffel Program L}^oans^{DL Progra}^{m Loans}
^{Stafford L}^oans^{PLUS Loans}^Stafford^Loans^{PLUS Loans}^Disbursement^Period
^Origination^Default^Origination^Default^Origination^Origination
^{Fee (%)}^{Fee (%)}^{Fee (%)}^{Fee (%)}^{Fee (%)}^{Fee (%)}
^{July 1, 2}⁰⁰^6-Ju^ne^{2.0 1.0}^{3.0 1.0}^3.0^4.0
^{30, 2}⁰⁰⁷
^{July 1, 2}⁰⁰^7-Ju^ne^{1.5 1.0}^{3.0 1.0}^2.5^4.0
^{30, 2}⁰⁰⁸
^{July 1, 2}⁰⁰^8-Ju^ne^{1.0 1.0}^{3.0 1.0}^2.0^4.0
^{30, 2}⁰⁰⁹
^{July 1, 2}⁰⁰^9-Ju^ne^{0.5 1.0}^{3.0 1.0}^1.5^4.0
^{30, 2}⁰¹⁰
^{On or afte}^{r J}^{uly 1,}^{0.0 1.0}^{3.0 1.0}^1.0^4.0
²⁰¹⁰
^Source:^H^{EA, §§ 428(b), 4}^38(c),^{and 45}^5(c).

Consolidation Loans enable borrowers to simplify the repayment of their federal student loans by
combining multiple loans into a single loan. Depending on the amount owed, loan consolidation
may also provide borrowers the opportunity to repay their loans over an extended period of time,
which reduces the monthly payment amount (although it increases the total amount that must be

^(...c^on^tin^ue^d)
^a^tta^c^h^m^e^nts^/^dlb⁹⁹^36a^.^pdf^{. Som}^e^c^ontr^o^v^e^r^s^y^s^u^r^r^oun^de^{d t}^h^e^Se^c^r^e^t^a^r^y^of^Educ^a^tion’^s^a^u^th^or^ity^{to m}^a^k^e^this^r^e^duc^tio^n.
^S^ee^Educ^at^io^{n D}^aⁱ^l^y^,^J^u^ne¹⁸^{, 19}^{99, p. 3.}

paid due to the longer period over which interest accrues). In addition, loan consolidation
currently affords borrowers the opportunity to lock in a fixed interest rate on their student loans,
based on the weighted average of the interest rates in effect on the loans being consolidated,
rounded up to the nearest higher one-eighth of 1%, but capped at 8.25%. Borrowers are not
assessed origination fees or default fees on Consolidation Loans.
To be eligible to obtain a Consolidation Loan, a borrower must have an outstanding principal
balance on at least one loan made under either the FFEL or DL programs that is eligible for
inclusion in a Consolidation Loan (described below). To obtain a Consolidation Loan under the
FFEL program, an applicant must have borrowed one or more eligible loans under either the
FFEL or DL programs. Borrowers seeking to obtain an FFEL program Consolidation Loan may ³²
apply to borrow from any eligible lender participating in the FFEL program. In general, to
obtain a Consolidation Loan under the DL program, an applicant must have borrowed one or
more eligible loans under the DL program. However, an applicant who has borrowed under the
FFEL program, but not the DL program, may obtain a Consolidation Loan under the DL program
if the borrower (1) is unable to obtain a Consolidation Loan from an FFEL program lender, (2) is
unable to obtain an FFEL Consolidation Loan with income-sensitive repayment plan terms ³³
acceptable to the borrower, or (3) intends to apply for loan forgiveness through Loan
Forgiveness for Public Service Employees program under the DL program.
A Consolidation Loan must be comprised of at least one eligible FFEL or DL program loan, and
may contain other types of federal student loans. The types of FFEL and DL program loans
eligible for inclusion in a Consolidation Loan are Subsidized Stafford Loans, Unsubsidized
Stafford Loans, PLUS Loans, and in certain instances Consolidation Loans (discussed below).
Other types of federal student loans made outside of the FFEL and DL programs are also eligible
for inclusion in Consolidation Loans. These loan types (some of which are no longer being
disbursed), are: Federal Perkins Loans; Guaranteed Student Loans; Federal Insured Student
Loans; National Direct Student Loans; National Defense Student Loans; Supplemental Loans for
Students (SLS); Auxiliary Loans to Assist Students (ALAS); Health Education Assistance Loans
(HEAL); and Public Health Service Act Health Professions Student Loans (HPSL), Loans for
Disadvantaged Students (LDS), and Nursing Loans.
Applicants for Consolidation Loans must be either (1) in repayment status, (2) in the grace period
before entering repayment, or (3) in default, but have made satisfactory repayment arrangements
for their loans, or have agreed to repay according to the FFEL program income-sensitive
repayment plan or the DL program income-contingent repayment plan. For a borrower with a
defaulted loan, making “satisfactory repayment arrangements” for purposes of obtaining a
³²
^If^an^F^F^E^L^l^eⁿ^d^e^{r secu}^{res an}ⁱⁿ^su^ran^{ce agree}^m^en^t^t^o^m^a^{ke Co}ⁿ^s^o^lⁱ^d^atⁱ^oⁿ^L^o^an^s,^t^h^{e l}^e^nd^{er m}^a^y^o^{ffer Co}ⁿ^s^o^lⁱ^d^atⁱ^oⁿ
^L^o^aⁿ^s⁽^upo^{n r}^e^q^u^e^s^t)^t^o^a^ll^bor^r^o^w^e^r^s^f^o^r^w^hom^the^le^nde^r^is^the^s^o^le^loaⁿ^h^o^lde^r^.^A^l^{so, if}^FFEL^pr^og^ra^m^le^nde^{rs opt}^to
^m^a^k^e^C^ons^olida^tio^{n L}^o^aⁿ^s^,^the^y^m^a^y^{not dis}^c^rⁱ^mⁱ^na^te^a^g^aⁱ^ns^{t bor}^r^o^w^e^r^s^s^e^e^k^ing^{to obta}ⁱ^{n a}^C^o^ns^oli^d^a^tio^{n L}^o^aⁿ^,^ba^s^e^d
^u^p^oⁿ⁽¹^{) t}^h^{e nu}^m^b^{er an}^d^t^y^p^e^o^f^e^lⁱ^gⁱ^b^l^e^st^ud^en^t^l^o^an^{s t}^h^{e bo}^rro^w^e^{r seeks t}^o^coⁿ^s^o^lⁱ^d^at^{e (w}ⁱ^t^h^cert^aⁱⁿ^excep^tⁱ^oⁿ^s^);⁽²⁾
^the^ty^pe^of^instituti^on^the^borr^o^w^e^{r a}^tte^nde^d;^{or (}³^{) t}^h^eⁱⁿ^te^re^{st ra}^te^{to be}^c^h^a^r^g^e^{d to t}^h^e^b^o^rrow^e^{r (w}^hⁱ^c^h^de^pe^nds^on
^the^ty^pe^s^of^loaⁿ^s^be^ing^c^o^ns^oli^d^a^t^e^d^aⁿ^d^w^h^eⁿ^the^y^w^e^r^e^fⁱ^r^s^{t dis}^bur^s^e^d)^{. A}^dditi^ona^lly^{, FFEL}^pr^og^r^a^m^le^nde^r^s^m^a^y
^not^dis^c^rⁱ^mⁱ^na^te^w^{ith r}^e^g^a^r^d^{to th}^e^ty^pe^s^o^f^r^e^pay^m^eⁿ^{t s}^c^he^dule^s^t^h^ey^m^a^k^e^av^a^ila^ble^{to b}^o^r^r^o^w^e^r^s^.
³³^Ef^f^e^c^tive^J^u^ly^{1, 200}^{9, a}ⁿ^a^p^plic^aⁿ^{t w}^{ho ha}^s^b^o^r^r^o^w^e^{d u}^nde^r^t^h^e^FFEL^pr^og^r^a^m^,^{but n}^o^t^the^D^L^pr^og^r^a^m^,^m^a^y^a^l^s^o
^obtaⁱ^{n a}^C^o^ns^oli^d^a^tio^{n L}^o^aⁿ^un^de^r^the^D^L^pr^og^r^a^mⁱ^f^the^bor^r^o^w^e^r^is^una^b^l^e^to^ob^ta^{in a}ⁿ^FFEL^C^o^ns^olida^tⁱ^oⁿ^L^o^aⁿ
^wⁱ^t^hⁱⁿ^co^m^e^-b^ased^rep^a^ymen^t^p^l^aⁿ^t^e^rm^{s ac}^cep^t^a^b^l^{e t}^o^t^h^{e bo}^rro^w^e^r.

Consolidation Loan means that the defaulted borrower has made at least three consecutive
voluntary full monthly payments within 15 days of the due date. However, borrowers who are in
default and who are subject to a court judgement or wage garnishment are not eligible to obtain
Consolidation Loans.
In general, a set of loans may be consolidated only once. However, in select circumstances a
Consolidation Loan may be “reconsolidated.” Loans made to borrowers within 180 days prior to
or after the date of obtaining a Consolidation Loan may be added to the Consolidation Loan.
Borrowers of existing Consolidation Loans who have other eligible loans that have not been
consolidated, or who subsequently obtain other eligible loans, may consolidate those loans with
their existing Consolidation Loans for purposes of obtaining new Consolidation Loans.
Borrowers of FFEL program Consolidation Loans, whose loans have been referred to a guaranty
agency for default aversion assistance, may reconsolidate into the DL program for purposes of ³⁴
repaying according to the income-contingent repayment (ICR) plan. Finally, borrowers of FFEL
program Consolidation Loans may reconsolidate into the DL program for the purposes of
applying for loan forgiveness through Loan Forgiveness for Public Service Employees program
under the DL program, or receiving the no accrual of interest for active duty service members
benefit available to borrowers of DL program loans.
At present, interest rates on Consolidation Loans made under both the FFEL and DL programs are
determined by taking the weighted average of the interest rates on the loans being consolidated,
and rounding the result up to the nearest higher one-eighth of 1%, with a cap of 8.25%. The
common Consolidation Loan interest rate formula currently used for both programs was
established under the Higher Education Amendments of 1998. Previously, the interest rate
formulas used in the FFEL and DL programs differed. A history of the interest rate formulas for
Consolidation Loans that have been in effect over the course of the FFEL and DL programs is
presented in Table (see Appendix B).
Borrowers are able to consolidate their loans while in the six-month grace period after ceasing to
be enrolled on at least a half-time basis. Consolidating during the grace period provides
borrowers of variable-rate Stafford Loans (which were disbursed between October 1, 1992 and
June 30, 2006) the opportunity to use the grace period interest rate (which is 0.6 percentage points
lower than the repayment rate) in the “weighted average calculations” used to determine the fixed
rate for the Consolidation Loan.
Under both the FFEL and DL programs, lenders are required to disclose to borrowers of
Consolidation Loans whether consolidation of FFEL or DL program loans would result in the loss
³⁴
^Ef^f^e^c^tive^J^u^ly^{1, 200}^9,^bor^r^o^w^e^r^s^of^FFEL^pr^og^r^a^m^C^ons^olida^tⁱ^oⁿ^L^o^aⁿ^s^,^w^hos^e^loaⁿ^s^ha^v^e^be^eⁿ^r^e^f^e^r^r^e^{d to a}
^gu^aran^t^y^a^g^en^c^y^f^o^{r d}^e^fau^l^t^aversⁱ^oⁿ^assi^st^an^{ce o}^r^w^h^o^s^{e l}^o^an^{s are}^al^read^yⁱⁿ^d^e^f^a^u^l^t^,^m^a^y^re^coⁿ^s^o^lⁱ^d^at^{e i}ⁿ^t^o^t^h^{e DL}
^p^r^o^g^ram^f^o^{r p}^u^r^po^{ses o}^f^rep^a^yⁱⁿ^g^acco^rdⁱⁿ^{g t}^o^t^h^{e ICR}^o^rⁱⁿ^co^m^e^-b^ased^rep^a^ymen^t^{(IBR) p}^l^an^s.^(T^h^e^{ICR an}^d^IBR
^plaⁿ^s^a^r^e^de^s^c^rⁱ^be^d^be^low⁾^.

of any loan benefits, including loan forgiveness, cancellation, or deferment; and that the
consolidation of a Perkins Loan will result in a loss of the in-school deferment benefit and loan
cancellation benefits.
Borrowers who consolidate Subsidized Stafford Loans with other types of unsubsidized loans
retain the interest subsidies applicable to Subsidized Stafford Loans on the portion of the
Consolidation Loan represented by Subsidized Stafford Loans. For borrowers of these loans, the
Secretary of Education (the Secretary) pays the interest that accrues while they are in school, and
during grace deferment periods. This benefit has always been afforded to borrowers of DL
program Consolidation Loans, and was extended to borrowers of FFEL program Consolidation
Loans under the Emergency Student Loan Consolidation Act of 1997 (part of P.L. 105-78, the
Departments of Labor, Health and Human Services, and Education, and Related Agencies
Appropriations Act for 1998).

As described above, statutory and regulatory provisions of the FFEL and DL programs establish
the maximum interest rates and fees that may be paid by borrowers. In the FFEL program, the
lender is required to pay the origination fee to the federal government; and the lender can choose ³⁵
whether or not to pass the entire fee on to the borrower, within certain limitations. The default
fee (which defrays federal default costs) is paid to the guaranty agency for the guarantor’s locally
held federal reserve fund. If the default fee is paid by the borrower, it must be deducted
proportionally from the proceeds of the loan prior to payment to the borrower. The default fee
may also be paid by other non-federal sources (e.g., by the lender or the guarantor).
Lenders in the FFEL program have often competed for borrowers by offering different packages
of interest rate and fee discounts. To attract borrowers, lenders might pay origination fees or
default fees without passing on the cost to students. Similarly, to attract loan business, guaranty
agencies might opt to pay the default fee. The practice of waiving fees may have started as the
FFEL loan industry began experiencing competition from the DL program, although lenders also
compete with each other for business.
Likewise, under the DL program, the Secretary is authorized to offer borrowers interest rate ³⁶
reductions as a means of encouraging on-time repayment. Any such reductions made under the
DL program must be cost neutral to the government. This section briefly describes examples of
the types of loan discounts and interest rebates that have commonly been offered to borrowers of ³⁷
loans made under the FFEL and DL programs.
³⁵
^F^F^E^L^l^eⁿ^d^e^{rs t}^h^at^ch^{arge an}^o^rⁱ^gⁱⁿ^atⁱ^oⁿ^f^ee^m^u^st^gen^e^ral^l^y^ass^e^{ss t}^h^{e same fee t}^o^al^l^b^o^r^ro^w^e^rs.^Aⁿ^excep^tⁱ^oⁿ^t^o^t^hⁱ^s
^rule^{is t}^h^a^t^a^le^nde^{r m}^a^y^a^sse^{ss a}^le^sse^{r orig}^ina^{tion f}^e^e^f^o^r^a^bor^r^o^w^e^r^w^hos^e^EFC^is^e^qua^{l t}^o^or^le^s^s^t^h^aⁿ^t^h^e^m^a^xⁱ^m^u^m
^qua^lif^yⁱ^ng^EFC^f^o^r^a^P^e^{ll G}^r^aⁿ^t.^Se^e^{34 C}^.^F.R^.^§⁶⁸^2.2⁰²⁽^c⁾^.
³⁶^H^E^A^,^{§ 45}⁵⁽^b)⁽⁸⁾^;³⁴^C^.^F.R^.^§⁶^85.²¹¹⁽^b)^.
³⁷^T^h^e^s^t^ude^nt^loaⁿ^dis^c^o^unts^a^{nd r}^e^pay^m^eⁿ^{t inc}^eⁿ^tiv^e^s^de^s^c^rⁱ^be^{d in}^this^s^e^c^tion^m^a^y^be^m^a^de^av^a^ila^ble^{to b}^o^r^r^o^w^e^r^s^,
^{but a}^r^e^not^r^e^quir^e^{d t}^o^be^pr^ov^ide^d^.

Lenders have broad discretion in whether to offer loan discounts and in how they structure these
benefits. A wide variety of student loan discounts have typically been offered by lenders making
loans under the FFEL program—for example, paying fees on behalf of a borrower, or offering
interest rate reductions. Some benefits might be structured such that they may only be realized if
the borrower successfully makes a specified number of consecutive on-time payments (e.g., 12,
24, or 36). Benefits that are not provided until well into the repayment period, however, may not
be beneficial to borrowers who desire to pay off their loans early or who consolidate their loans,
as in such instances, these benefits may be lost. Some of the most common types of loan ³⁸
discounts offered by FFEL program lenders are described below.
Sometimes, lenders pay the loan origination fee on behalf of borrowers; and sometimes either
lenders or guaranty agencies also pay the 1% default fee. This allows borrowers to apply a greater
percentage (up to 100%) of the amount borrowed toward their education expenses. Otherwise, as
described above, when borrowers are required to pay origination and default fees on their loans,
their net disbursement, or the amount of loan proceeds that may be applied toward education
expenses, is less than their gross disbursement, or the total amount borrowed which must be
repaid.
Lenders may offer interest rate reductions to borrowers who reach certain milestones. For
example, a lender may provide a borrower an interest rate reduction at graduation, or an interest
rate reduction after making a specified number of consecutive on-time payments (e.g., a one
percentage point reduction after making a certain number of on-time payments). Interest rate
reductions also may be offered to borrowers who sign up for electronic debit account (EDA)
repayment, whereby loan payments are automatically deducted from the borrower’s checking or
savings account (e.g., a 0.25 percentage point interest rate reduction for EDA repayment).
Some lenders offer principal balance reductions or account credits to borrowers who reach certain
milestones. For example, a principal balance reduction of a certain amount (e.g., 1%) might be
granted upon graduation or upon entering repayment. Principal balance reductions might also be
offered upon making a series consecutive of on-time payments (e.g., 1% after 12, 24, and 36 on-
time payments).
³⁸
^For^a^dditi^ona^l^e^x^am^ple^s^of^s^t^ude^{nt l}^o^aⁿ^dis^c^ou^nts^of^f^e^r^e^{d by}^le^nder^s^{, s}^e^e^FinAid^.or^g^{, “}^S^t^udeⁿ^t^L^o^aⁿ^Dⁱ^s^c^ounts^,^”^a^t
^http:^//w^w^w^.f^inaⁱ^d.or^g^/loaⁿ^s^/^s^t^ude^ntloa^ndis^c^o^unts^.^ph^tm^{l; a}^nd^Green^t^r^{ee Ga}^zet^t^e^,^“On^lⁱⁿ^{e S}^t^u^d^e^nt^L^o^an^Bu^yⁱⁿ^g^G^uⁱ^d^e,^”
^a^t^http^://stu^de^ntl^o^aⁿ^listⁱ^ng^s.c^o^m^/^.

Some lenders may offer to forgive the last several payments on a borrower’s loan (e.g., the last ³⁹
six payments). This type of benefit may be structured so that it only applies to payments 115
through 120 of a 120 payment schedule. (Thus, borrowers who consolidate or repay their loans in
less than 115 payments would not realize this benefit.)
Currently, two repayment incentive programs are offered to borrowers of Stafford Loans and
PLUS Loans made under the DL program: (1) an up-front interest rebate; and (2) an interest rate
reduction for EDA repayment. Borrowers may take advantage of either or both.
Borrowers of Stafford Loans and PLUS Loans made under the DL program currently receive a
1.5% up-front interest rebate. The rebate is equal to a percentage of the principal loan amount
borrowed and it is applied by increasing the borrower’s loan proceeds, or the borrower’s net ⁴⁰
disbursement. To retain the interest rebate amount, the borrower must make the first 12 monthly
payments on time. If not all of the first 12 monthly payments are made on time, the rebate amount
is added back to the borrower’s loan principal, increasing the loan amount that must be repaid.
Borrowers may opt to make payments on their student loans using EDA repayment. Under this
option, student loan payments are automatically deducted from a borrower’s checking or savings
account. This option helps ensure that borrowers make their student loan payments on time.
While repaying under the EDA repayment option, borrowers receive a 0.25% interest rate
reduction on their student loans. The interest rate reduction for EDA repayment does not apply
during in-school, grace, deferment, or forbearance periods.
³⁹
^T^h^e^dis^c^ha^r^g^e^of^s^t^ude^{nt l}^o^aⁿⁱⁿ^d^e^bte^dne^s^s^,^s^u^c^h^a^s^thr^oug^h^the^f^o^r^g^iv^eⁿ^e^s^s^o^f^loaⁿ^pa^y^m^eⁿ^ts^or^prⁱⁿ^cⁱ^pa^{l ba}^la^nc^e
^r^e^duc^tio^ns^{, g}^e^ne^r^a^lly^r^e^s^u^lts^{in th}^e^am^{ount f}^o^r^g^iv^eⁿ^or^r^e^paⁱ^d^beⁱⁿ^g^c^ons^ide^r^e^d^ta^x^a^ble^inc^o^m^e^unde^r^the^Iⁿ^te^rⁿ^a^l
^R^e^v^e^nue^C^ode⁽^I^R^C⁾^.^For^a^dditⁱ^oⁿ^a^l^inf^o^r^m^a^{tion o}ⁿ^t^h^is^t^opic^,^s^e^e^“^E^x^c^lusⁱ^{on of}^Iⁿ^c^o^m^e^A^ttr^ibuta^b^l^e^{to t}^h^e^Dⁱ^s^c^ha^r^g^e
^of^C^e^r^t^aⁱ^{n Stu}^d^eⁿ^{t L}^o^aⁿ^D^e^b^t^aⁿ^d^N^H^S^C^Ed^uc^a^tiona^{l L}^o^aⁿ^R^e^pa^y^m^eⁿ^ts^,”^pp.⁴^55-⁴⁵^{8 in}^S.^Pr^t.¹⁰⁹^-⁰⁷^2,^Ta^x
^Ex^pe^ndit^u^r^e^s^:^C^o^m^p^e^ndi^um^of^Ba^c^k^g^r^oun^{d M}^a^te^rⁱ^al^oⁿ^Iⁿ^divⁱ^du^al^Pr^ov^is^ions^{, 20}⁰⁶^.
⁴⁰^For^de^ta^ils^oⁿ^t^h^e^D^L^up-^f^r^ont^int^e^r^e^s^t^r^e^ba^te^{, s}^e^e^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tio^{n, D}ⁱ^r^e^c^t^L^o^aⁿ^B^u^lle^ti^{n (}^D^L^B⁾^01-^19,
^“^I^m^p^le^m^e^nting^Up-f^{ront I}ⁿ^te^re^{st Re}^ba^te^{in Disb}^urse^m^e^{nt Ca}^lc^ula^tions,”^Ju^ne²⁰⁰¹^{, a}^t^htt^p^://w^ww^.i^fa^p.e^d^.g^ov^/
^dlb^u^lle^ti^ns/dl^b⁰¹¹⁹^.h^tm^l.

The repayment period for Stafford Loans begins six months and one day after the borrower first
ceases to be enrolled on at least a half-time basis in an eligible program. (This six-month period is ⁴¹
commonly referred to as the six-month grace period.) The repayment period for PLUS Loans
and Consolidation Loans begins the day the loan is fully disbursed. The repayment period for
Stafford Loans, PLUS Loans, and Consolidation Loans excludes any periods of authorized
deferment and forbearance (described below). The first payment on Stafford Loans, PLUS Loans,
and Consolidation Loans is due no later than 60 days after the beginning of the repayment period.
For a borrower who is exiting a period of deferment or forbearance, the first or next subsequent
payment is due no later than 60 days after the end of the deferment or forbearance period.
For borrowers of Subsidized Stafford Loans, the federal government pays the interest that accrues
while borrowers are enrolled in school on at least a half-time basis, during a six-month grace
period thereafter, and during periods of authorized deferment (discussed below). In contrast,
borrowers of Unsubsidized Stafford Loans and PLUS Loans are responsible for paying this
interest. Borrowers of Unsubsidized Stafford Loans and PLUS Loans may pay the interest that
accrues while they are enrolled in school and during the six-month grace period, either on a
monthly or quarterly basis; otherwise, this interest is capitalized, or added to the loan principal.
Borrowers of FFEL and DL program loans may repay their loans ahead of schedule and may not
be assessed a penalty for doing so.
Borrowers of FFEL and DL program loans are given the opportunity to choose from among a
series of repayment plan options for the repayment of their loans. The particular repayment plans
available to borrowers depend on the type of loan borrowed and under which program the loan
was made. The availability of certain repayment plans to individual borrowers also may depend
on when they became new borrowers or when they entered repayment.
The standard repayment plan, graduated repayment plan, and extended repayment plan options
are available to borrowers of both FFEL and DL program loans. The income-sensitive repayment
⁴¹
^T^h^{e si}^x-^m^oⁿ^t^h^{grace p}^e^ri^o^d^excl^u^d^e^{s an}^y^p^e^ri^o^d^o^f^u^p^t^o^t^h^{ree y}^e^a^r^{s d}^u^rⁱⁿ^{g w}^hⁱ^c^h^{a b}^o^r^r^o^w^e^{r w}^h^oⁱ^s^{a me}^m^b^{er o}^f^a
^r^e^s^e^r^v^e^c^o^m^pone^{nt of}^the^A^r^m^e^{d For}^c^e^s^is^c^a^lle^{d or}^or^de^r^e^d^to^a^c^tiv^e^duty^f^o^r^a^pe^rⁱ^od^of^m^o^r^e^thaⁿ³⁰^da^y^s^{, a}^s^w^e^{ll a}^s
^an^y^ad^dⁱ^tⁱ^oⁿ^a^l^p^e^ri^odⁿ^ecessar^y^fo^{r su}^{ch a b}^o^rro^w^e^{r t}^o^resu^m^e^en^ro^l^l^m^en^t^at^t^h^{e n}^e^xt^avai^l^a^b^l^{e regu}^l^a^{r en}^ro^l^l^m^en^t
^pe^rⁱ^od^.

(ISR) plan is available only to borrowers of FFEL program loans. The income-contingent
repayment (ICR) plan and alternative repayment plans are available only to borrowers of DL
program loans. On July 1, 2009, the income-based repayment (IBR) plan will become available to
borrowers of loans made under both the FFEL and DL programs (except parent borrowers of
PLUS Loans and borrowers of Consolidation Loans containing PLUS Loans made to parent
borrowers).
Prior to the enactment of the HERA, there were many differences between the repayment plans
available to borrowers of FFEL program loans and the corresponding repayment plans available ⁴²
to borrowers of DL program loans. Those repayment plans that are available both to borrowers
of FFEL program loans and borrowers of DL program loans—standard repayment, graduated ⁴³
repayment, extended repayment, and IBR—are now aligned to be consistent across both loan
programs.
If a borrower fails to select a repayment plan, the borrower is provided a standard repayment
plan. Borrowers of FFEL program loans may switch to another repayment plan once annually; ⁴⁴
and borrowers of DL program loans may switch plans at any time. No repayment plan may
require a borrower to repay a loan in less than five years, unless the borrower specifically
requests a shorter period. Under the standard repayment, graduated repayment, extended
repayment, and income-sensitive repayment plans, payment amounts may not be less than the ⁴⁵
interest due.
Under the FFEL program, to the extent practicable, all loans borrowed by an individual from a
particular lender must be combined into a single account and repaid according to the same
repayment plan. Under the DL program, all of a borrower’s DL program loans must be repaid
according to the same repayment plan; except that a borrower of PLUS Loans may repay those
loans under a different repayment plan than used to repay his other loans. The repayment plans
available to borrowers of FFEL and DL program loans are discussed below.
Repayment according to a standard repayment plan presents a borrower with a predictable
monthly payment amount. According to the standard repayment plan, borrowers of Subsidized
Stafford Loans, Unsubsidized Stafford Loans, and PLUS Loans make fixed monthly payments of ⁴⁶⁴⁷
no less than $50, for a period of up to 10 years. For loans with variable interest rates, the loan
holder may annually adjust either the monthly payment amount or the length of the repayment
⁴²
^Ch^an^{ges en}^act^ed^uⁿ^d^e^{r t}^h^{e HE}^R^A^t^o^t^h^{e rep}^a^ymen^t^p^l^an^{s f}^o^{r DL}^p^r^o^g^ram^l^o^an^{s b}^eca^m^e^e^f^f^e^ctⁱ^v^{e S}^e^p^t^em^b^e^{r 1}⁰^,
²⁰⁰⁷^.^F^o^r^ad^dⁱ^tⁱ^oⁿ^a^lⁱⁿ^f^o^rm^atⁱ^oⁿ^oⁿ^t^h^{ese ch}^an^{ges an}^d^t^h^{e ch}^aract^eri^s^tⁱ^c^{s o}^f^p^r^e-HE^RA^rep^a^ymen^t^p^l^an^{s f}^o^{r DL}
^p^r^o^g^ram^l^o^an^s,^{see U.}^S^.^Dep^a^rt^men^t^o^f^E^d^u^catⁱ^o^n,^Di^rect^L^o^an^Bu^l^l^etⁱⁿ^,^“New^Di^rect^L^o^an^Rep^a^ymen^t^P^l^an^{s a}ⁿ^d
^Ch^an^{ges i}ⁿ^t^h^{e T}^r^eat^m^eⁿ^t^o^f^Coⁿ^s^o^lⁱ^d^at^ed^P^L^US^L^o^an^{s and}^F^e^d^e^ral^P^e^rkiⁿ^{s L}^o^an^s,^{” DL}^B-0⁷^-¹⁶^,^J^u^l^y³¹^,²⁰⁰⁷^,^at
^http:^//w^w^w^.if^a^p.e^d^.g^ov^/dlb^ulle^tiⁿ^s^/D^L^B^0716.^htm^l^.
⁴³^T^h^e^I^B^R^plaⁿ^be^c^o^m^e^s^av^a^ila^ble^{to b}^o^r^r^o^w^e^r^s^J^u^ly^{1, 20}⁰⁹^.
⁴⁴^T^h^{e S}^ecret^ar^y^ma^y^req^uⁱ^{re a b}^o^r^r^o^w^e^r^w^h^o^h^a^{s d}^e^f^a^u^l^t^e^d^on^{an F}^F^E^L^o^r^DL^p^r^o^g^ram^l^o^an^t^o^rep^a^y^acco^rdⁱⁿ^{g t}^o^t^h^e
^{ICR p}^l^an^.
⁴⁵^Inc^o^m^e^-c^onting^e^{nt re}^pa^y^m^eⁿ^{t, in}^c^o^m^e^-ba^s^e^d^re^pa^y^m^eⁿ^{t, a}^{nd a}^lte^rⁿ^a^tiv^e^re^pa^y^m^eⁿ^{t pla}ⁿ^{s pe}^rm^{it ne}^g^a^tiv^e
^am^or^tiz^a^{tion (}^s^e^e^g^l^os^s^a^r^y^f^o^r^de^fⁱ^niti^on)^.
⁴⁶^T^h^e^la^{st pa}^y^m^eⁿ^{t m}^a^y^be^f^o^{r le}^ss^thaⁿ^$5^0.
⁴⁷^U^nde^r^t^h^e^s^t^a^nda^r^d^r^e^pa^y^m^eⁿ^{t pla}ⁿ^{, a}^r^e^pa^y^m^eⁿ^{t pe}^rⁱ^o^d^of^u^p^t^o¹⁰^y^e^a^r^s^a^l^s^o^a^pplie^s^t^o^D^L^pr^og^r^a^m^C^ons^olida^tⁱ^on
^L^o^an^{s f}^o^{r b}^o^rro^w^e^{rs w}^h^o^en^tered^rep^a^y^m^en^{t b}^e^f^o^{re Ju}^l^y¹^,²⁰⁰⁶^.

period. If the repayment amount remains the same on a variable rate loan, and the change in the
interest rate would result in a borrower being unable to complete repayment within the 10-year
maximum, the loan holder must provide administrative forbearance for a maximum of three years
(effectively extending the repayment period).
For borrowers of Consolidation Loans, a minimum monthly payment of $50 applies, however,
longer repayment periods may be applicable depending on the borrower’s outstanding loan ⁴⁸
balance at the time of entering repayment. The repayment period on a Consolidation Loan is
based on the combined balances of the Consolidation Loan and all other federal student loans
owed by the borrower. (However, for purposes of determining the repayment period, the balance
of other federal student loans may not exceed the balance of the Consolidation Loan.) Repayment
periods for Consolidation Loans repaid according to the standard repayment plan are shown in
Table 4. (The repayment periods shown also apply to the graduated and income-sensitive
repayment plans).
Table 4. Repayment Periods for Consolidation Loans Repaid According to the
Standard, Graduated, and Income-Sensitive Repayment Plans
^{Combined Loa}^{n Balance at R}^epayment^{Maximum Repayment Period}
^{Less tha}^{n $}^7,50⁰^{10 yea}^rs
^$7,50^{0, b}^{ut less tha}^{n $}^10,0⁰⁰^{12 yea}^rs
^$10,0^00,^{but less t}^han^$2^0,00⁰^{15 yea}^rs
^$20,0^00,^{but less t}^han^$4^0,00⁰^{20 yea}^rs
^$40,0^00,^{but less t}^han^$6^0,00⁰^{25 yea}^rs
^$60,0⁰⁰^{or more}^{30 yea}^rs
^Source:^H^{EA, §§ 428C(c)(2) and}⁴⁵^1.
Repayment according to a graduated repayment plan is structured so that a borrower’s monthly
payment amount changes over the course of the repayment period. In general, payments will
increase over time, consistent with the assumption that a borrower’s income will generally
increase over the duration of the repayment period. Thus, when repaying according to a graduated
repayment plan, a borrower makes smaller payments at first, and larger payments later on. The
range of monthly payment amounts is limited so that no payment may be more than 3 times the ⁴⁹
amount of any other. This is to avoid offering very low initial payment amounts and excessively
high ending payment levels which could contribute to borrower default. For Stafford Loans and
PLUS Loans, monthly payments may be no less than the greater of $50, or the interest that
accrues between payments; and repayment must occur within 10 years. For loans with variable
interest rates, the loan holder may annually adjust either the monthly payment amount or the
length of the repayment period. In a manner similar to the standard repayment plan, if the
⁴⁸
^T^h^e^r^e^pay^m^eⁿ^{t pe}^rⁱ^ods^dis^c^us^s^e^d^he^r^e^a^r^e^a^pplic^a^b^le^t^o^F^F^EL^pr^og^r^a^m^C^ons^oli^d^a^tio^{n L}^o^aⁿ^s^aⁿ^{d t}^o^D^L^pr^og^r^a^m
^C^ons^ol^ida^tⁱ^{on L}^o^aⁿ^s^t^o^bor^r^o^w^e^r^s^w^{ho e}ⁿ^te^r^r^e^pa^y^m^eⁿ^{t on}^or^a^f^te^r^J^u^ly^{1, 20}^06.^T^h^e^10-^y^e^a^r^r^e^pay^m^eⁿ^{t pe}^rⁱ^{od a}^p^plie^s
^t^o^bo^rro^w^e^{rs o}^f^DL^p^r^o^g^ra^m^Coⁿ^s^o^lⁱ^d^atⁱ^oⁿ^L^o^an^{s w}^h^o^eⁿ^t^e^red^repa^ym^en^t^b^e^f^o^{re Ju}^l^y¹^,²⁰⁰⁶^an^{d wh}^o^rep^a^y^acco^rdⁱⁿ^g
^{to t}^h^e^s^t^a^nda^r^d^r^e^pa^y^m^eⁿ^{t pla}ⁿ^.
⁴⁹^Se^e^{34 C}^F^R^§⁶^82.²⁰⁹⁽^a⁾⁽⁷⁾⁽ⁱⁱ⁾^;^a^{nd 6}⁸⁵^.²^09.

repayment amount remains the same on a variable rate loan, and the change in the interest rate
would result in a borrower being unable to complete repayment within the 10-year maximum, the
loan holder must provide administrative forbearance for a maximum of three years.
For Consolidation Loans repaid according to a graduated repayment plan, monthly payment
amounts may be adjusted over a period of time ranging from 10 to 30 years, depending on the ⁵⁰
borrower’s outstanding loan balance at the time of entering repayment. Similar to the standard
repayment plan, determination of the repayment period is based on the combined balances of the
Consolidation Loan and all other federal student loans owed by the borrower. Repayment periods
for Consolidation Loans repaid according to the graduated repayment plan are shown in Table 4.
Repayment according to an extended repayment plan affords borrowers with larger total loan
balances the opportunity to make lower monthly payments over a longer repayment period.
Extended repayment plans are available to individuals who are new borrowers on or after October

7, 1998; and who, after that date, accumulate an outstanding loan balance totaling more than ⁵¹

$30,000 under either the FFEL program or the DL program. Borrowers of Stafford Loans, PLUS
Loans, and Consolidation Loans repaying according to the extended repayment plan must make
fixed or graduated monthly payments of at least $50; and the repayment period may not exceed

25 years.

Under an income-sensitive repayment plan, monthly payment amounts are adjusted annually
according on the borrower’s income. Income-sensitive repayment plans are available only to
borrowers of FFEL program loans. For Stafford Loans and PLUS Loans, monthly payments may
be no less than the greater of $50, or the interest that accrues between payments; and repayment
must occur within 10 years. Similar to the graduated repayment plan, no payment may be more
than three times the amount of any other. However, if a borrower’s income is too low to make
payments in amounts to repay the loan within 10 years, the loan holder must provide
administrative forbearance for a period of up to five years. For variable interest rate loans, the
loan holder may annually adjust either the monthly payment amount or the length of the
repayment period. In addition, if the repayment amount remains the same on a variable rate loan,
and the change in the interest rate would result in a borrower being unable to complete repayment
within the 10-year maximum, the loan holder must provide administrative forbearance for a
maximum of five years.
For Consolidation Loans repaid according to an income-sensitive repayment plan, monthly
payment amounts may be adjusted based changes in a borrowers income over a period of time
that may range from 10 to 30 years, depending on the borrower’s outstanding loan balance at the
⁵⁰
^T^h^e^r^e^pay^m^eⁿ^{t pe}^rⁱ^ods^dis^c^us^s^e^d^he^r^e^a^r^e^a^pplic^a^b^le^t^o^F^F^EL^pr^og^r^a^m^C^ons^oli^d^a^tio^{n L}^o^aⁿ^s^aⁿ^{d t}^o^D^L^pr^og^r^a^m
^C^ons^ol^ida^tⁱ^{on L}^o^aⁿ^s^t^o^bor^r^o^w^e^r^s^w^{ho e}ⁿ^te^r^r^e^pa^y^m^eⁿ^{t on}^or^a^f^te^r^J^u^ly^{1, 20}^06.^A^10-^y^e^a^r^r^e^pay^m^eⁿ^{t pe}^rⁱ^o^d^a^p^plie^s^to
^b^o^r^r^o^w^e^{rs o}^f^D^L^p^r^o^g^ra^m^Coⁿ^s^o^lⁱ^d^atⁱ^oⁿ^L^o^an^{s w}^h^o^en^t^e^{red rep}^a^ymen^t^b^e^f^o^{re Ju}^l^y¹^,²⁰⁰⁶^,^an^{d w}^h^o^rep^a^y^acco^rdⁱⁿ^g
^{to t}^h^e^s^t^a^nda^r^d^r^e^pa^y^m^eⁿ^{t pla}ⁿ^.
⁵¹^P^r^ior^to^Se^pte^m^be^r^10,²⁰⁰⁷^{, a}^di^f^f^e^r^eⁿ^{t e}^x^te^nde^{d r}^e^pa^y^m^eⁿ^{t pla}ⁿ^w^a^s^a^v^a^ila^ble^{to a}^{ll bor}^r^o^w^e^r^s^of^D^L^pr^og^r^a^m
^loaⁿ^s^.^U^nde^r^t^h^is^pr^ior^v^e^r^s^ion^of^the^e^x^te^nde^{d r}^e^pa^y^m^eⁿ^{t pla}ⁿ^{, t}^h^e^r^e^pay^m^eⁿ^{t pe}^rⁱ^{od r}^a^ng^e^d^f^r^om^{12 to}^{30 y}^e^a^r^s^,
^de^pe^nd^ing^oⁿ^t^h^e^b^o^r^r^o^w^e^r^’^s^s^t^ud^eⁿ^{t loa}ⁿ^de^b^t^.

time of entering repayment.⁵² Similar to the standard repayment plan, determination of length of
the repayment period is based on the combined balances of the Consolidation Loan and all other
federal student loans owed by the borrower. Repayment periods for Consolidation Loans repaid
according to the income-sensitive repayment plan are shown in Table 4.
Repayment according to the ICR plan affords borrowers the opportunity to make payment
amounts based on the relationship between their student loan debt and their income. It also
affords borrowers who experience prolonged periods with low incomes the prospect of debt
forgiveness. The ICR plan is available to borrowers of Stafford Loans and most borrowers of
Consolidation Loans made under the DL program. It is not currently available to borrowers of ⁵³
PLUS Loans. Beginning July 1, 2009, graduate and professional student borrowers of PLUS
Loans, but not parent borrowers, will become eligible to repay PLUS Loans according to the ICR
plan. Under the ICR plan, annual payments (which are divided by 12 for the monthly amount) are
adjusted annually based on the borrower’s outstanding loan balance at the time of entering
repayment, adjusted gross income (AGI), and family size according to criteria established by the ⁵⁴
Secretary in regulations. Consistent with these criteria, payment amounts are the lesser of (1)
the amount calculated according to a 12-year repayment period, multiplied by an income ⁵⁵
percentage factor that corresponds to the borrower’s AGI; or (2) 20% of the amount by which ⁵⁶
the borrower’s AGI exceeds the poverty line. Monthly payment amounts may range from $0 for
borrowers with incomes at or below the poverty line to amounts more than sufficient to repay the
loan in 12 years for borrowers with high incomes. Thus, a borrower at the poverty level or below
would not be required to make any payment. For borrowers whose monthly payment amount is
greater than $0, but less than $5, a $5 minimum monthly payment is required.
Under the ICR plan formula, it is possible that a borrower’s monthly payment amount may be
less than the accrued interest on his loan. When this happens, the unpaid interest is capitalized.
(This is also referred to as negative amortization.) The rules for the ICR plan specify that
capitalization of unpaid interest may not result in the balance of the loan exceeding 110% of the
original principal amount. If this occurs, any additional interest that accrues must be paid by the
borrower.
⁵²
^T^h^e^r^e^pay^m^eⁿ^{t pe}^rⁱ^ods^dis^c^us^s^e^d^he^r^e^a^r^e^a^pplic^a^b^le^t^o^F^F^EL^pr^og^r^a^m^C^ons^oli^d^a^tio^{n L}^o^aⁿ^s^aⁿ^{d t}^o^D^L^pr^og^r^a^m
^C^ons^ol^ida^tⁱ^{on L}^o^aⁿ^s^t^o^bor^r^o^w^e^r^s^w^{ho e}ⁿ^te^r^r^e^pa^y^m^eⁿ^{t on}^or^a^f^te^r^J^u^ly^{1, 20}^06.^T^h^e^10-^y^e^a^r^r^e^pay^m^eⁿ^{t pe}^rⁱ^{od a}^p^plie^s
^t^o^bo^rro^w^e^{rs o}^f^DL^p^r^o^g^ra^m^Coⁿ^s^o^lⁱ^d^atⁱ^oⁿ^L^o^an^{s w}^h^o^eⁿ^t^e^red^repa^ym^en^t^b^e^f^o^{re Ju}^l^y¹^,²⁰⁰⁶^an^{d wh}^o^rep^a^y^acco^rdⁱⁿ^g
^{to t}^h^e^s^t^a^nda^r^d^r^e^pa^y^m^eⁿ^{t pla}ⁿ^.
⁵³^A^t^pr^e^s^eⁿ^{t, ne}^ithe^r^bor^r^o^w^e^r^s^of^P^L^U^S^L^o^aⁿ^sⁿ^o^r^bor^r^o^w^e^r^s^of^P^L^U^S^C^ons^olida^tⁱ^oⁿ^L^o^aⁿ^s^m^a^de^be^f^o^r^e^J^u^l^y^{1, 2}⁰⁰⁶
^a^r^e^e^lig^ible^f^o^r^the^I^C^R^plaⁿ^{. H}^o^w^e^v^e^r^,^bor^r^o^w^e^r^s^of^C^ons^olida^tⁱ^o^ns^L^o^aⁿ^s^m^a^de^{on or}^a^f^te^r^J^u^ly^{1, 200}^6,^tha^t^c^o^ntaⁱⁿ
^P^L^US^L^o^an^{s m}^a^y^rep^a^y^acco^rdⁱⁿ^{g t}^o^t^h^{e ICR}^p^l^an.
⁵⁴^{34 C}^.^F.R^.^§⁶⁸^5.²⁰^{9. A}^uni^que^c^h^a^r^a^c^t^e^r^is^tic^of^the^I^C^R^plaⁿ^is^th^a^t^tw^{o m}^a^r^rⁱ^e^d^bor^r^o^w^e^r^s^of^D^L^pr^og^r^a^m^loaⁿ^s^m^a^y
^r^e^pay^theⁱ^r^loaⁿ^s^joiⁿ^tly^ba^s^e^{d on}^theⁱ^r^c^o^m^b^ine^d^l^o^aⁿ^ba^la^nc^e^s^.^P^a^y^m^eⁿ^{t am}^ounts^a^r^e^c^r^e^d^ite^{d t}^o^e^a^c^h^bor^r^o^w^e^r^’^s
^a^c^c^{ount i}ⁿ^pr^op^or^ti^on^to^theⁱ^r^outs^t^a^ndi^ng^loaⁿ^ba^la^nc^e^.
⁵⁵^T^h^e^inc^o^m^e^pe^r^c^eⁿ^ta^g^e^f^a^c^t^or^s^r^a^ng^e^f^r^o^m^50.5²^%^to²⁰^0%^{, de}^peⁿ^d^ing^oⁿⁱⁿ^c^o^m^e^a^{nd inc}^o^m^e^ta^x^fⁱ^ling^s^t^a^t^us^{. Se}^e
^U.^S^.^Dep^a^rt^m^eⁿ^t^o^f^E^d^u^catⁱ^oⁿ^,^Di^rect^L^o^an^Bu^l^l^e^tⁱⁿ^,^“20⁰⁸^HHS^P^o^vert^y^G^uⁱ^d^elⁱⁿ^{es and}^In^c^o^m^e^P^e^rcen^t^a^{ge F}^act^o^r^s,^”
^DL^B-08-08,^Ma^rc^h^18,²⁰⁰⁸^{, a}^t^h^ttp://w^ww^.i^f^a^p.e^d^.g^ov^/dlbu^lle^tins/⁰³¹^8DL^B⁰⁸⁰^8.^htm^l^{. For a}^d^diti^on^a^l^inf^o^rm^a^{tion on}
^the^I^C^R^P^l^aⁿ^f^o^r^m^ula^,^s^e^e^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tⁱ^on,^O^f^fⁱ^c^e^of^Fe^de^r^a^{l St}^ude^nt^Aⁱ^{d, “}^N^otic^e^of^t^h^e^aⁿⁿ^u^a^l^u^pda^te^s
^{to t}^h^e^Iⁿ^c^o^m^e^C^ontiⁿ^g^e^{nt R}^e^pa^y^m^eⁿ^{t (}^I^C^R⁾^plaⁿ^f^o^r^m^ula^f^o^r²⁰⁰⁷^,”⁷²^Fe^de^{ral Re}^giste^r^{, 2}⁶⁸^03-²⁶⁸⁰⁸^.
⁵⁶^HHS^P^o^vert^y^Guⁱ^d^elⁱⁿ^{es f}^o^{r A}^l^l^S^t^a^t^{es (}^excep^t^A^l^a^s^ka^an^{d Ha}^waiⁱ^{) a}ⁿ^d^t^h^{e Di}^st^ri^ct^o^f^Co^l^u^mbⁱ^a^{, 20}^08,^a^t
^h^t^t^p^:/^/^a^sp^e.^hh^s.^go^v/^p^o^v^er^t^y^/⁰⁸^pover^t^y^.^sh^t^m^l^.^Iⁿ²⁰⁰⁸^,^f^o^r^{a f}^a^mⁱ^l^y^o^f^oⁿ^e^,^th^{e HHS}^po^ver^t^y^guⁱ^d^elⁱⁿ^{e i}^s^$¹⁰^,⁴⁰^0;^f^o^r^a
^f^a^mⁱ^l^y^of^t^w^{o it is}^$^14,⁰⁰^{0; f}^o^r^a^f^a^mⁱ^l^y^of^thr^e^e^{it is}^$1^7,⁶⁰^{0; a}ⁿ^{d f}^o^r^a^f^a^mⁱ^l^y^of^f^our^{it is}^$2^1,2⁰⁰^.

As a condition of repaying according to the ICR plan, borrowers must provide written consent for
the Internal Revenue Service (IRS) to disclose their taxpayer identity information, their tax filing ⁵⁷
status, and their AGI to ED. For purposes of the ICR plan, AGI includes the income of the
borrower and the borrower’s spouse, if applicable.
The IBR plan is a newly authorized repayment plan which, like ISR and ICR plans, is designed to
present borrowers the opportunity to make monthly payment amounts based on the relationship
between their student loan debt and their income. Also, like the ICR plan, it affords borrowers
who experience prolonged periods of low income the prospect of debt forgiveness. The IBR plan
will be available to borrowers of loans made under both the FFEL and DL programs; whereas the
ISR is only available to borrowers of FFEL program loans, and the ICR plan is only available to
borrowers of DL program loans. Also, in contrast to other repayment plans which are generally
available to borrowers, a borrower must be experiencing a “partial financial hardship” (described
below) in order to qualify to repay according to the IBR plan.
Effective July 1, 2009, the IBR plan becomes available to borrowers of FFEL and DL program
loans (except parent borrowers of PLUS Loans, and borrowers of Consolidation Loans used to
repay PLUS Loans made to parent borrowers) for any period after that date during which they
demonstrate having a partial financial hardship. Borrowers will be determined to have a partial
financial hardship if their total annual payments on eligible FFEL and DL program loans,
calculated according to a standard 10-year repayment period at the time of initially entering
repayment, are greater than 15% of the amount by which their AGI exceeds 150% of the poverty
line.
For example, in 2008, 150% percent of the poverty line for a family of 1 is $15,600.⁵⁸ Thus, a
single borrower with an adjusted gross income of $40,000 would have a partial financial hardship
if his annual student loan payments were greater than $3,360, or $280 per month. ($3,360 is 15%
of the result from subtracting $15,600, from $40,000.)
While repaying according to the IBR plan, monthly amounts due on borrowers’ loans may range
from $0, for borrowers with incomes at or below the poverty line, to a maximum of one-twelfth
of 15% of any amount by which their AGI exceeds 150% of the poverty line. If borrowers
repaying according to the IBR plan no longer demonstrate a partial financial hardship or no
longer desire to repay according to the IBR plan, then their maximum required monthly payment
amounts may not exceed the “initial” monthly amount due, as calculated according to a standard
10-year repayment period based on their loan balance at the time of their election to begin
repaying according to the IBR plan. Accordingly, repayment periods for such borrowers may
exceed 10 years.
For a married borrower who files a joint federal income tax return, payment amounts under the
IBR plan will be based on the applicable borrower’s student loan debt and both spouses’
combined AGI. However, for a married borrower who files a separate federal income tax return,
payment amounts under the IBR plan will be based solely on that individual’s student loan debt
⁵⁷
^{34 C}^.^F.R^.^§⁶⁸^5.²⁰⁹⁽^c⁾⁽⁷⁾^.
⁵⁸^F^o^r^a^d^dⁱ^tⁱ^oⁿ^a^{l i}ⁿ^f^o^r^m^atⁱ^oⁿ^on^pover^t^y^guⁱ^d^elⁱⁿ^es,^{see U.}^S^.^Dep^a^r^t^men^t^o^f^Heal^t^h^an^d^H^u^m^aⁿ^S^e^r^vⁱ^ces,^“²⁰⁰⁸^H^H^S
^Pov^e^rty^G^u^ide^line^s^,”^a^t^htt^p^://a^sp^e^.^hhs.g^ov^/^P^O^V^ERT^Y^/08p^ov^e^r^ty^.^s^htm^l^.

and AGI. (There is not an opportunity under the IBR plan for married borrowers to repay their
loans jointly, comparable to the ICR plan.)
Payments made by borrowers repaying under the IBR plan must first be credited to interest due
on the loan, then to any fees, and then to principal. If a borrower’s required payment is not
sufficient to cover the interest that accrues on a subsidized Stafford Loan (or the subsidized
portion of a Consolidation Loan), the interest not covered will be paid by the Secretary for a ⁵⁹⁶⁰
period not to exceed three years. Any unpaid interest that accrues on an unsubsidized loan, or
on a Subsidized Stafford Loan after the three-year period, will be capitalized (i.e., added to the
principal balance of the loan) at the time a borrower no longer demonstrates a partial hardship or
elects to no longer repay according to the IBR plan. If a borrower’s required monthly payment is
not sufficient to repay the amount of principal due, then the payment of any principal due will be
postponed until the borrower no longer has a partial financial hardship or leaves the IBR plan.
Borrowers who at any time participate in the IBR plan become eligible to have any balance
remaining on their loan after 25 years forgiven by the Secretary if they:
• made reduced monthly payments while experiencing a partial financial hardship;
• made recalculated monthly payments after leaving the IBR plan, or upon no
longer having a partial financial hardship;
• made monthly payments on all outstanding FFEL and DL program loans in
repayment (other than parent PLUS Loans) under another repayment plan of not
less than the amount required under the standard repayment plan, based on a 10-
year repayment period;
• made payments under the income-contingent repayment plan; or
• received an economic hardship deferment.
The Secretary may establish alternative repayment plans for borrowers of DL program loans who
demonstrate that they are unable to repay according to other available repayment plans due to
exceptional circumstances. If the Secretary agrees to permit a borrower to repay according to an
alternative repayment plan, the Secretary notifies the borrower in writing of the terms of the plan,
and the borrower may either accept those terms or select one of the other available repayment
plans discussed above. Under an alternative repayment plan, the borrower may be provided up to
30 years to repay, not including periods of deferment and forbearance. Alternative repayment
plans may permit a borrower to make monthly payments for less than the amount of the accrued
interest on the loan, with any unpaid interest being capitalized. Capitalization of unpaid interest
may not result in the balance of the loan exceeding 110% of the original principal amount. If this
occurs, any additional interest that accrues must be paid by the borrower.
⁵⁹
^P^e^ri^o^d^s^d^u^rⁱⁿ^{g w}^hⁱ^c^h^{a bo}^rro^w^e^{r recei}^{ves a d}^e^f^e^r^m^en^t^f^o^{r ec}^onom^ic^ha^r^d^s^hⁱ^p^a^r^e^e^x^c^l^ude^{d f}^r^om^this^thr^e^e^-^y^e^a^r
^pe^rⁱ^od^.
⁶⁰^Un^su^b^sⁱ^dⁱ^zed^l^o^an^{s i}ⁿ^cl^ud^{e Un}^sub^sⁱ^dⁱ^zed^S^t^aff^o^rd^L^o^an^s,^P^L^US^L^o^an^s,^and^po^rtⁱ^oⁿ^s^o^f^Coⁿ^s^olⁱ^d^atⁱ^oⁿ^L^o^an^s
^a^ttributa^b^le^to^the^re^pa^y^m^eⁿ^{t of}^suc^h^l^o^aⁿ^s.

Several forms of repayment relief are available to borrowers of loans made under the FFEL and
DL programs who may be experiencing difficulty in making payments on their student loans.
These benefits are broadly categorized as deferments, forbearance, and interest rate benefits for
active duty servicemembers.
Deferment and forbearance are the primary means through which borrowers may be temporarily
relieved of their obligation to make scheduled loan payments. Periods during which borrowers are
in deferment or forbearance are generally excluded from the repayment period. (An exception
applies in the case of the IBR plan, for which periods in economic hardship deferment are
included in the 25-year repayment period, after which borrowers become eligible for loan
forgiveness.) In addition, interest rate benefits may be available to certain categories of active
duty servicemembers. Deferments, forbearance, and interest rate benefits may help borrowers
avoid defaulting on their loans, as well as help prevent student loan debt and the accrual of
interest and fees from inhibiting their pursuit of further studies. These forms of borrower
repayment relief are described below.
A deferment is the temporary cessation of a borrower’s obligation to repay loan principal and
interest, usually limited by law to a specific period of time, and contingent upon the borrower
meeting certain conditions. Deferments enable borrowers to suspend loan repayment while they,
or the individual on whose behalf the loan was made (for parent borrowers of PLUS Loans), are
pursuing additional postsecondary education, during periods of unemployment or economic
hardship, and during certain periods of military service.
In general, deferments are borrower specific—that is, once a borrower has received a deferment
for the period specified in law (if limited), the borrower is not eligible to receive an additional
deferment for the same condition, even if subsequently borrowing additional loans. Because of
frequent amendments, the types of deferment for which borrowers are eligible can vary according
to when the loan is disbursed, the type of loan, and whether the borrower has an outstanding
balance on other loans. The Higher Education Amendments of 1992 (P.L. 102-325) made major
changes to deferments by consolidating the terms according to which borrowers may qualify. In ⁶¹
general, until July 1, 1993, one set of conditions for deferments applied. Beginning July 1, 1993,
new conditions became applicable to new borrowers, who prior to that date had no outstanding
balance on FFEL or DL program loans. Subsequently, additional types of deferments with
different effective dates have been made available. Finally, some types of deferments have
recently been made available to borrowers irrespective of when they became a new borrower.
⁶¹
^B^o^r^r^o^w^e^r^s^w^{ith outs}^t^aⁿ^ding^l^o^aⁿ^ba^la^nc^e^s^pr^ior^{to J}^u^ly^1,¹⁹⁹³^re^m^a^{in e}^lig^ible^t^o^de^f^e^{r re}^pa^y^m^eⁿ^{t of}^theⁱ^{r loa}ⁿ^s—
ⁱⁿ^cl^udⁱⁿ^{g l}^o^an^{s bo}^rro^w^e^d^af^t^e^{r t}^h^at^d^a^t^e^—u^nd^{er a b}^r^o^a^d^e^{r set}^o^f^cri^t^e^ri^{a t}^h^an^{are avai}^l^a^b^l^{e t}^oⁱⁿ^dⁱ^vi^du^al^{s w}^h^o^fⁱ^rst
^b^o^r^r^o^w^e^d^af^t^e^{r t}^h^at^d^a^t^e^.^F^o^{r i}ⁿ^st^an^ce,^t^h^ey^m^a^y^d^e^f^e^{r l}^o^an^{s d}^u^rⁱⁿ^g^p^e^ri^o^d^s^o^f^servi^{ce i}ⁿ^t^h^{e U.}^S^.^A^r^med^F^o^rces,^t^h^e
^P^{eace Co}^rp^s,^VIS^T^A^,^o^r^t^h^e^P^u^b^lⁱ^c^Heal^t^h^S^e^rvi^ce;^w^hⁱ^l^e^ser^vⁱⁿ^{g as}^{a m}^e^dⁱ^calⁱⁿ^t^e^rn^o^r^resi^d^eⁿ^t^;^o^r^w^hⁱ^l^e^t^eachⁱⁿ^{g i}ⁿ
^shorta^g^e^a^r^e^a^s^{. Elig}^ibility^c^r^ite^ria^f^o^{r de}^f^e^r^m^eⁿ^{ts f}^o^{r borrow}^e^rs^w^ith^outsta^ndi^ng^loaⁿ^ba^la^nc^e^s^pri^o^{r t}^o^July^{1, 1}⁹⁹³^a^r^e
^s^p^e^cⁱ^fⁱ^e^d^{in r}^e^g^u^la^tions^c^odifⁱ^e^d^a^t³⁴^C^.^F.R^.^§⁶^82.²¹^0.

For Subsidized Stafford loans (and the portion of Consolidation Loans attributable to the
repayment of Subsidized Stafford Loans), the federal government pays the interest that accrues
during the deferment period. For all other loans, the borrower is responsible for the payment of
accrued interest—either by making such payments monthly or quarterly, or by having the interest
added to their principal balance (i.e., capitalized) at the end of period of deferment.
The following types of deferments are available to borrowers of loans currently being disbursed.
Borrowers are eligible for an in-school deferment for any period during which they are pursuing
at least a half-time course of study as determined by the eligible institution attended.
Parent borrowers of PLUS Loans for which the first disbursement is made on or after July 1,
2008, are eligible for a deferment for any period during which the student on whose behalf the
loan was made would qualify for an in-school deferment. Also, parent borrowers and graduate
and professional student borrowers of PLUS Loans first disbursed on or after July 1, 2008, are
eligible for a deferment during the six-month grace period after the student on whose behalf the
loan was made first ceases to be enrolled on at least a half-time basis.
This deferment is available to borrowers while pursuing a course of study pursuant to a graduate
fellowship program approved by the Secretary. Graduate fellowship deferments are not available
to borrowers who are serving in medical residency or internship programs, except for residency
programs in dentistry.
This deferment is available to borrowers while pursuing a course of study pursuant to a
rehabilitation training program for disabled individuals approved by the Secretary.
This type of deferment is available to borrowers who are unemployed, as evidenced by receipt of
unemployment benefits, or their inability to secure employment after registering with a public or
private employment agency. Borrowers are not required to have been previously employed to
qualify for an unemployment deferment. A borrower may receive an unemployment deferment
for a maximum cumulative period of three years. This may include one or more episodes of
unemployment.
Currently, this type of deferment is available to borrowers of loans made under the FFEL and DL
program if

• the borrower has been granted an economic hardship deferment under the FFEL,
DL, or Perkins Loan program for the same period of time for which the borrower
requests an economic hardship deferment;
• the borrower is receiving payments under a federal or state public assistance
program (e.g., Temporary Assistance for Needy Families, Supplemental Security
Income, Food Stamps);
• the borrower is working full-time and has a monthly income that does not exceed
the greater of (1) the minimum wage rate, or (2) an amount equal to 150% of the
poverty line applicable to the borrower’s family size (as calculated on a monthly
basis);
• the borrower is working full-time and has a federal education debt burden equal
to or greater than 20% of his monthly income; and if the amount remaining after
subtracting his debt burden from his monthly income is less than 220% of the
greater of (1) the minimum wage rate, or (2) an amount equal to 150% of the
poverty line applicable to the borrower’s family size (as calculated on a monthly ⁶²
basis);
• the borrower is not working full-time and (1) the borrower’s monthly income
does not exceed twice the amount that is the greater of (a) the minimum wage
rate, or (b) an amount equal to 150% of the poverty line applicable to the
borrower’s family size (as calculated on a monthly basis); and (2) the borrower’s
remaining monthly income after deducting the amount of his monthly federal
education debt burden does not exceed the greater of the amounts specified in (a)
and (b) above; or
• the borrower is serving as a volunteer in the Peace Corps.
A borrower may receive an economic hardship deferment for periods of up to one year at a time,
for a maximum cumulative period of three years.
Under the CCRAA, changes were made to the criteria according to which borrowers may qualify
for an economic hardship deferment. Among other things, these changes eliminated what has
been commonly referred to as the 20/220 pathway to an economic hardship deferment. Beginning
July 1, 2009, borrowers will be able to qualify for an economic hardship deferment only
according to the criteria presented above in the first, second, third, and sixth bullets. Borrowers
who qualify for an economic hardship deferment according to criteria in effect prior to July 1,
2009, will be able to retain the deferment for a period of up to one year from the start date of the
deferment. After that date, borrowers may only qualify for an economic hardship deferment ⁶³
according to the criteria in effect at the time of their request.
⁶²
^For^pur^pos^e^s^of^q^u^a^lif^yⁱ^ng^f^o^r^aⁿ^e^c^onom^ic^ha^r^d^s^hⁱ^p^de^f^e^r^m^eⁿ^{t, f}^e^de^r^a^{l e}^duc^a^tio^na^{l de}^bt^bur^de^{n is}^c^a^lc^ula^t^e^d^oⁿ^the
^ba^sⁱ^s^of^m^onthly^loaⁿ^pa^y^m^eⁿ^ts^a^m^or^tiz^e^d^ov^e^r^a^m^a^xⁱ^m^u^m^pe^rⁱ^od^of^{10 y}^e^a^r^s^.
⁶³^For^a^dditi^ona^l^inf^o^r^m^a^{tion o}ⁿ^t^h^e^r^e^pe^a^l^of^the²⁰^/2²⁰^pa^thw^a^y^{to a}ⁿ^e^c^oⁿ^o^mⁱ^c^ha^r^d^s^h^ip^de^f^e^r^m^eⁿ^{t, s}^e^e^D^e^pa^r^t^m^e^nt
^of^Educ^a^tio^{n, “}^F^e^d^e^r^a^l^P^e^rk^{ins L}^o^aⁿ^P^r^og^ra^m^,^Fe^de^ra^{l Fa}^mⁱ^l^y^Educ^a^{tion L}^o^aⁿ^P^r^og^ra^m^,^a^{nd W}^illia^m^{D. Ford Fe}^de^ra^l
^Dⁱ^r^e^c^t^L^o^aⁿ^P^r^og^r^a^m^;^Fina^{l R}^u^le^,^”⁷³^Fe^de^{ral Re}^gⁱ^ste^r⁶³²³^2-⁶³²^{59, O}^c^t^obe^r^23,²⁰⁰⁸^.

This type of deferment is available to all borrowers who are serving on active duty, or performing
qualifying National Guard duty, during a war or other military operation or national emergency.
The deferment is available for the period of qualifying service and for 180 days following the
demobilization date for such service.
This type of deferment is available to borrowers of FFEL and DL program loans who are
members of the National Guard or other reserve component of the Armed Forces (or a member in
retired status) and who are called or ordered to active duty while enrolled in an eligible
institution, or within six months of being enrolled. The deferment is limited to borrowers who
were serving on active duty on October 1, 2007, or who began active duty service after that date.
Eligible borrowers may receive a post-active duty service deferment for the 13-month period
following the conclusion of active duty service (or until re-enrollment). If a borrower qualifies for
both the military service deferment and the post-active duty student deferment, the 180-day post-
demobilization period and the 13-month post-active duty service period apply concurrently.
Forbearance is the practice under which lenders grant borrowers temporary relief from their
obligation to repay because the borrower is willing but unable to meet regular payment
obligations. A lender may provide forbearance by temporarily relieving a borrower from making
payments, by extending the time for making payments, or by temporarily accepting payments in
reduced amounts. Forbearance is usually used to prevent a loan from defaulting, but holders of
defaulted loans may also use forbearance during collection on a defaulted loan.
Unlike deferments for Subsidized Stafford Loans for which the interest is paid by the federal
government, any borrower who has been granted forbearance is liable for all the interest that
accrues during the forbearance period. Any interest that accrues is capitalized at the end of the
forbearance period. Also, unlike deferments, forbearance is typically granted at the option of the
loan holder as opposed to being mandated, although in certain instances mandatory forbearance is
required.
Borrowers must apply for forbearance, although they are not required to request forbearance in
writing. For certain types of forbearance, borrowers must provide supporting documentation.
Forbearance is usually granted in 12 month intervals, and borrowers must reapply each year.
Maximum time limits depend on the type of forbearance granted. No adverse credit information
may be provided to a consumer reporting agency solely because the borrower has been granted
forbearance.
Lenders are required to provide forbearance to borrowers in certain circumstances. Mandatory
forbearance is available to borrowers
• who are medical or dental interns or residents and who do not or no longer
qualify for a deferment, for the duration of their internship or residency;

• whose total federal student loan payments equal or exceed 20% of their monthly
income, for up to three years;
• who are serving in a national service position for which the borrower receives an
AmeriCorps national service educational award;
• whose federal student loan interest is being paid under a Department of Defense
Armed Forces Student Loan Repayment program;
• who are teachers who would qualify for loan repayment under the FFEL and DL
Teacher Loan Forgiveness programs, for up to five years of required service; and
• who are a member of the National Guard who qualify for a post-active duty
student deferment, but do not qualify for a military service deferment or other
deferment, and are engaged in active State duty for 30 or more consecutive days.
Administrative forbearance is available to borrowers under limited conditions as authorized by
the Secretary. As discussed earlier, administrative forbearance is available to borrowers for up to
three years if changes to variable interest rates preclude a borrower’s ability to repay the loan in
10 years under the standard or graduated repayment plans, and for up to five years if a borrower’s
income precludes the ability to repay in 10 years under the income-sensitive repayment plan.
In certain instances, active duty service members may be eligible for interest rate benefits on their
FFEL and DL program loans.
Section 207 of the SCRA provides that for individuals who borrow loans after August 14, 2008,
and who later enter military service, the interest rate on those loans must be capped at 6% for the ⁶⁴
duration of their military service. Creditors must forgive interest above the rate of 6% and may
not accelerate repayment of the loans.
For DL program loans first disbursed on or after October 1, 2008, (including Direct Consolidation
Loans used to repay the portion of FFEL program loans first disbursed on or after October 1,
2008) interest will not accrue during any period of up to 60 months while the borrower is serving
on active duty or performing qualifying National Guard duty in an area of hostilities during a war
or national emergency.
⁶⁴
^For^a^dditi^ona^l^inf^o^r^m^a^{tion o}ⁿ^t^h^e^SC^R^A^{, s}^e^e^C^R^S^R^e^por^{t R}^L³⁴⁵⁷^5,^T^h^e^Se^rv^ic^e^m^e^m^be^{rs Civ}^{il Re}^lie^{f Ac}^{t (}^S^CRA):
^Sum^m^a^r^y^aⁿ^d^Pr^o^pos^e^d^Am^e^ndm^eⁿ^ts^{, by}^R^.^C^huc^k^Ma^s^o^n.

As defined for purposes of the FFEL and DL programs, a defaulted loan is one on which the
borrower has failed to make a required payment when due, or on which the borrower has
otherwise violated the terms of the promissory note for 270 days (or 330 days if the loan is
repayable in installments less frequent than monthly) if it is reasonable to conclude that he no ⁶⁵
longer intends to repay the obligation.
Defaulted student loans are a significant problem both for the federal government and for
borrowers. Losses due to defaults constitute a major cost component in the federal student loan
programs. From the borrower’s perspective, defaulting on a student loan can ruin credit and
otherwise present a major obstacle to future economic well-being. The consequences of default
for borrowers are discussed below.
When a loan goes into default, the borrower effectively loses certain rights and privileges
associated with the loan (e.g., deferments and loan forgiveness). In addition, the agency in charge
of collections (i.e., the FFEL guaranty agency or the DL contractor) can demand payment in full ⁶⁶
of all principal and interest due, as well as payment of collection costs. There is no statute of
limitations on student loan collections. All borrowers must be informed of the consequences of
default as part of entrance counseling they receive when initially borrowing their loans. In
addition, as part of its due diligence requirements, the agency in charge of collecting on a
defaulted loan must apprise the defaulter of some of the major consequences of defaults. This
section summarizes elements of the law designed to improve collections of defaulted loans.
By law, loan holders and the agencies in charge of collection are required to enter into agreements
with national consumer reporting agencies to exchange information relating to student borrowers.
Such agreements require the guaranty agency to report a loan default and the status of collections
on that note. Consumer reporting agencies are authorized to report information on the status of a
defaulter’s account for seven years from the date the default claim is paid or, if the borrower
reenters repayment after defaulting and subsequently defaults, for seven years from the date of
the subsequent default.
Defaulters are liable for any federal tax refund due them to be attached by the Internal Revenue
Service (IRS) as repayment on their student loan. A number of states also attach refunds due on
state income taxes to collect student loans.
⁶⁵
^{34 C}^.^F.R^.^§^§⁶⁸²^.²^00;^aⁿ^d⁶^85.¹^02.
⁶⁶^A^t^pr^e^s^eⁿ^{t, bor}^r^o^w^e^r^s^m^a^y^be^c^h^a^r^g^e^{d up t}^o¹⁸^.⁵^%^of^the^o^u^ts^taⁿ^dⁱ^ng^prⁱⁿ^cⁱ^pa^l^ba^la^nc^e^f^o^r^c^o^lle^c^tio^{n c}^o^s^t^s^.

Social Security benefits are subject to being offset up to 15% of the payment amount.
Notwithstanding any state law to the contrary, guaranty agencies, or the Secretary in the case of
loans held by ED, may garnish up to 15% of a defaulter’s disposable pay to repay a defaulted
student loan. “Disposable pay” is defined as that part of compensation remaining after deducting
amounts required by law to be withheld. Defaulters must be given written notice of the intent to
garnish and have rights to examine the debt record, have a hearing concerning the existence and
amount of the debt or repayment terms, and to establish a repayment schedule before garnishment
begins. In the past, garnishment has particularly been used as a tool against defaulters who are
federal employees.
Students who have defaulted on an FFEL or DL program loan are ineligible for federal student
aid under Title IV. Defaulter borrowers who make six consecutive monthly payments on their
defaulted FFEL and DL loans may have their Title IV eligibility restored, but an individual
borrower may benefit from this provision only once.
The ultimate tool used to collect on a defaulted student loan is litigation under which the agency
in charge of collection sues the defaulter to compel repayment of the loan. Such civil suits are
required to be instituted under the due diligence regulations unless the note is assigned to ED for
collection through the IRS offset program, the lawsuit costs would exceed those of the likely
recovery, or the borrower does not have the funds to satisfy the judgment on the debt or a large
portion of it.

Loan rehabilitation offers defaulted borrowers an opportunity to have their loan reinstated as an
active loan and to have their borrower benefits and privileges restored. If, during a period of 10
consecutive months, a borrower who has defaulted on a loan makes nine monthly payments
within 20 days of the due date according to a payment plan agreed to by the borrower and
guaranty agency (or the Secretary), the loan may be sold to another lender, or (in the case of DL
loans) reinstated. At this point, the loan is considered rehabilitated and the borrower again
becomes eligible for full borrower privileges, such as deferments and loan forgiveness. In
implementing these provisions, the guarantor or ED must require a monthly payment that is
“reasonable and affordable” based on the borrower’s financial circumstances. Borrowers whose
defaulted loans are assigned to ED are offered the opportunity to obtain DL program
Consolidation Loans.

In accordance with the terms and conditions of loans made under the FFEL and DL programs, in
certain circumstances borrowers may have all or a portion of their debt discharged or repaid by
the federal government. These are described below.
At present, liability for FFEL and DL program loans is discharged in the case of borrowers who
die or become permanently and totally disabled. In addition, PLUS Loans to parent borrowers are
discharged if the student on whose behalf the parent borrower obtained the loan dies (but not if
the student becomes disabled).
Criteria to qualify for a disability discharge were amended under the HEOA. Effective July 1,
2010, FFEL and DL program loans will also be discharged for borrowers who are unable to
engage in any substantial gainful activity due to a physical or mental impairment that can be
expected to result in death or that has lasted continuously or can be expected to last continuously
for 60 months. Also, effective July 1, 2010, borrowers who have been determined by the
Secretary of Veterans Affairs to be unemployable due to a service-connected condition shall be
considered permanently and totally disabled.
In most instances, federal student loans may not be discharged through personal bankruptcy ⁶⁷
actions brought under either Chapter 7 or Chapter 13 of the bankruptcy code. However, if after
filing for bankruptcy, a borrower successfully petitions a bankruptcy court and the court finds that
repayment constitutes an undue hardship on the borrower and his dependents, federal student ⁶⁸
loans may be discharged in bankruptcy.
A borrower’s liability for a loan (including any interest and collection fees owed by the borrower)
may be discharged under any of the following circumstances if the borrower received the loan on
or after January 1, 1986. Loans may be discharged if the student borrower (or the student on
whose behalf a parent borrowed) was unable to complete an educational program because the
school closed. Any period of the student’s attendance at the institution at which the student was
unable to complete the course of study because of closure is not counted against the total period
of the student’s eligibility for additional student aid. Borrowers are eligible for loan discharge if
the school falsely certified the student’s eligibility to borrow, including loans falsely certified as a
result of identity theft. All or a portion of a borrower’s loan liability may be discharged if an
⁶⁷
^Se^e^{11 U}^.^S.C^.^§^§⁵²³^a^nd¹³²⁸^.
⁶⁸^For^a^dditi^ona^l^inf^o^r^m^a^{tion o}ⁿ^f^e^de^r^a^{l s}^t^ude^nt^loaⁿ^s^a^nd^ba^nk^r^u^ptc^y^{, s}^e^e^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^Educ^a^tⁱ^on,^Fe^de^r^a^l
^Stude^{nt A}ⁱ^{d O}^m^buds^m^a^{n, “}^B^aⁿ^k^r^uptc^y^,”^a^t^http://w^w^w^.o^m^buds^m^a^n.e^d^.g^ov^/^b^aⁿ^k^r^uptc^y^.htm^l.

institution fails to refund the appropriate amount of loan proceeds to a lender or to the Secretary
on behalf of a borrower. In addition, Title IV eligibility is restored for borrowers who may have
defaulted on a loan discharged under any of the above circumstances. Finally, the Third Higher
Education Extension Act of 2006 (P.L. 109-292) authorized the discharge of the outstanding ⁶⁹
balance of loans made to individuals who were the spouses or parents of individuals who died
or became permanently and totally disabled as a result of the September 11, 2001 terrorist attacks.
The HEA authorizes several programs through which borrowers may have some portion of their
FFEL or DL program loans forgiven, cancelled, or repaid as an incentive for entering certain
occupations or professions, or for performing certain types of public service. Some loan
forgiveness provisions are entitlements to qualified borrowers, meaning that mandatory funding is
provided for loan forgiveness. Other loan forgiveness and repayment programs are discretionary
and subject to the availability of funds made available in annual appropriations acts. In addition,
borrowers may also be eligible to have their loans repaid through other non-HEA programs. Loan
forgiveness and repayment programs authorized under Title IV, Parts B and D of the HEA are
described below.
Loan forgiveness for teachers is authorized for borrowers of FFEL and DL program loans.⁷⁰
Under the program, new borrowers, who had no outstanding balance on Title IV loans on or after ⁷¹
October 1, 1998, may be granted loan forgiveness after having served as a full-time teacher for ⁷²⁷³
five consecutive complete school years in certain low-income schools or locations. At least 1
of these school years must be after the 1997-1998 school year. Forbearance is available to
borrowers during their five years of qualifying teaching service. Teacher loan forgiveness is an
entitlement available to qualified borrowers. Two levels of loan forgiveness are available.
Up to $5,000 in loan forgiveness is available to borrowers who have been employed for five
consecutive complete school years as a full-time teacher in certain low-income schools or
locations. Borrowers whose five-year period of service began on or after October 30, 2004 must
⁶⁹
^P^a^r^e^nts^w^e^r^e^e^lig^ible^f^o^r^the^dis^c^ha^r^g^e^of^P^L^U^S^L^o^aⁿ^s^bor^r^o^w^e^{d o}ⁿ^be^ha^lf^of^a^c^h^ild^w^{ho w}^a^s^a^vⁱ^c^t^im^of^the
^Se^pte^m^be^r^{11, 2}⁰⁰¹^,^te^r^r^o^rⁱ^s^t^a^tta^c^k^s^,^a^{nd C}^ons^oli^d^a^tio^{n L}^o^aⁿ^s^us^e^d^to^r^e^pa^y^s^u^c^h^loaⁿ^s^.
⁷⁰^L^o^an^f^o^rgi^v^en^ess^f^o^{r t}^each^ers^w^a^{s en}^act^ed^uⁿ^d^e^{r t}^h^{e T}^a^xp^a^y^er-^T^ea^ch^{er P}^r^o^t^ectⁱ^oⁿ^A^c^t^o^f²⁰⁰⁴^(T^T^P^A^;^P^.^L^.¹⁰⁸^-
⁴⁰⁹⁾^,^aⁿ^{d w}^a^s^am^e^nde^{d un}^de^r^the^H^E^R^A^a^{nd the}^H^E^O^A^.
⁷¹^T^{hus, a}ⁿⁱⁿ^dⁱ^vⁱ^dua^{l w}^{ith a}ⁿ^o^u^tst^a^nding^l^o^aⁿ^ba^la^nc^e^on^a^T^itle^IV^loaⁿ^be^f^o^re^Oc^tobe^{r 1,}¹⁹⁹⁸^{is i}ⁿ^e^lig^ible^f^o^{r this}
^pr^og^r^a^m^,^unle^s^s^the^loaⁿ^ba^la^nc^e^is^pa^{id i}ⁿ^f^u^ll^be^f^o^r^e^a^g^aⁱ^{n bor}^r^o^wⁱ^ng^unde^r^the^FFEL^or^D^L^pr^og^r^a^m^.
⁷²^{Breaks i}ⁿ^servi^{ce ar}^{e au}^t^h^o^rⁱ^zed^f^o^{r b}^o^rro^w^e^{rs w}^h^o^ret^u^rn^t^o^sc^h^o^o^{l t}^o^p^u^rsue^a^d^diti^ona^{l e}^duc^a^tioⁿ^re^la^te^{d to t}^h^e
^qua^lif^yⁱ^ng^te^ac^hing^s^e^r^v^ic^e^,^w^{ho ha}^v^e^a^c^onditi^on^c^o^v^e^r^e^{d un}^de^r^t^h^e^Fa^mⁱ^l^y^a^{nd Me}^dic^a^l^L^e^a^v^e^A^c^t^of¹⁹⁹^3,^or^w^ho
^a^r^e^c^a^lle^{d or}^or^de^r^e^{d t}^o^a^c^tiv^e^dut^y^f^o^r^m^o^r^e^tha^t³⁰^da^y^s^{in a}^r^e^s^e^r^v^e^c^o^m^pone^nt^of^the^A^r^m^e^{d For}^c^e^s^.
⁷³^T^h^e^s^e^s^c^hools^a^r^e^de^fⁱ^ne^{d a}^s^low^-^inc^o^m^e^f^o^r^pur^pos^e^s^of^loaⁿ^c^aⁿ^c^e^lla^tion^un^de^r^the^Fe^de^r^a^l^P^e^r^k^ins^L^o^aⁿ^pr^og^r^a^m^.
^A^T^e^a^c^he^{r L}^o^aⁿ^Forg^iv^eⁿ^e^{ss L}^o^w^Inc^o^m^e^Dire^c^t^or^y^{is a}^v^a^ila^ble^a^t^htt^p^s://w^ww^.tc^li.e^d^.g^ov^/^CBSW^e^bA^pp/tc^li/
^T^C^L^I^P^u^b^S^cho^o^l^S^earch^.^j^sp^.

be highly qualified teachers, as defined in the Elementary and Secondary Education Act (ESEA),
§ 9101.
Up to $17,500 in loan forgiveness is available to borrowers who meet the general requirements
described above and whose teaching service is as a full-time teacher of mathematics or science in
a secondary school; or as a special education teacher.
Loan forgiveness for public service employees is available to borrowers of DL program loans
who are employed full-time in certain public service jobs for 10 years during the repayment of ⁷⁴
their loans. To qualify for loan forgiveness, borrowers must make 120 monthly payments on or
after October 2, 2007, according to the ICR plan, the IBR plan, or either of the standard,
graduated, or extended repayment plans in amounts equal to or greater than the monthly amount
due as calculated according to a standard 10-year repayment period, while concurrently being
employed full-time in public service jobs. After having made 120 qualifying payments, a
borrower’s remaining loan balance will be forgiven. Loan forgiveness for public service
employees is available to new and existing borrowers of DL program loans and is an entitlement
to qualified borrowers.
For purposes of the program, a public service job is defined as a full-time job in emergency
management, government (excluding service as a Member of Congress), military service, public
safety, law enforcement, public health (including nurses, nurse practitioners, and health care
practitioners), public education, social work in a public child or family service agency, public
interest law services (including prosecution or public defense or legal advocacy in low-income
communities at a nonprofit organization), early childhood education, public service for
individuals with disabilities, public service for the elderly, public library sciences, school-based
library sciences and other school-based services, or at an organization that is described in §
501(c)(3) of the IRC and exempt from taxation under § 501(a); or teaching as a full-time faculty
member at a Tribal College or University as defined in § 316(b) of the HEA and other faculty
teaching in high-needs areas, as determined by the Secretary.
Under this program, borrowers of FFEL or DL program loans who are employed full-time in an
occupation specified as an area of national need may qualify to have a portion of their outstanding
loan balance forgiven by the Secretary. Up to $2,000 in FFEL or DL program student loan debt
may be forgiven for each school, academic, or calendar year of full-time employment in an area
of national need completed on or after August 14, 2008. A maximum of $10,000 may be forgiven
for five years of service. Specified areas of national need are early childhood educators; nurses;
foreign language specialists; librarians; certain highly qualified teachers; child welfare workers;
speech-language pathologists and audiologists; school counselors; certain public sector
⁷⁴
^L^o^aⁿ^f^o^rg^iv^eⁿ^e^s^s^f^o^{r public}^s^e^rvⁱ^c^e^e^m^ploy^e^e^s^w^a^s^eⁿ^a^c^t^e^d^unde^r^t^h^e^CCRA^A^a^{nd w}^a^s^a^m^e^nde^{d un}^de^{r the}^H^E^O^A^.
^For^a^d^diti^ona^l^inf^o^r^m^a^{tion on}^the^pr^og^r^a^m^s^e^e^C^R^S^R^e^por^{t R}^S²²⁷⁶^2,^L^o^an^F^o^rgⁱ^ven^{ess f}^o^r^P^u^b^lⁱ^c^Servi^{ce E}^m^p^l^o^yees
^Unde^{r the}^W^illi^{am D. F}^o^rd^Dire^c^t^Lo^an^Progr^am^{, by}^D^a^vⁱ^{d P}^.^Sm^ole^.

employees; nutrition professionals; medical specialists; mental health professionals; dentists;
employees in science, technology, engineering, and mathematics (STEM) fields; physical
therapists; superintendents, principals, and other (school) administrators; and occupational
therapists. PLUS Loans obtained by parent borrowers on behalf of a dependent student and
Consolidation Loans used to repay such loans are not eligible to be forgiven under the program.
The program is authorized to be funded at such sums as may be necessary for FY2009-FY2014
and subject to the appropriation of funds will be available to borrowers on a first come, first ⁷⁵
served basis.
Under this program, borrowers of federal student loans may qualify to have a portion of the
outstanding balance of their loans repaid if they enter into agreements with the Secretary to serve
as a full-time civil legal defense attorney for a period of not less than three years. In return for
their service, the Secretary will assume the obligation to make payments of up to $6,000 per year,
and up to $40,000 in the aggregate, on federal student loans made under FFEL, DL, and Perkins
Loan programs. Loan repayment made available under the program may not be used to repay a
PLUS Loan obtained by a parent borrower on behalf of a dependent student, nor the portion of a
Consolidation Loan used to repay such a loan. The program is authorized to be funded at $10
million for FY2009; and such sums as may be necessary for FY2010-FY2014. Subject to the
appropriation of funds, loan repayment will be available to borrowers on a first come, first served ⁷⁶
basis.
⁷⁵
^T^h^e^L^o^aⁿ^For^g^iv^eⁿ^e^s^s^f^o^r^Se^r^v^ice^{in A}^r^e^a^s^of^N^a^tiona^{l ne}^e^d^pr^og^r^a^m^w^a^s^eⁿ^a^c^t^e^d^unde^r^t^h^e^H^E^O^A^.^T^h^e^pr^og^r^a^m^is
^est^a^b^lⁱ^s^h^e^d^at^§⁴²⁸^K^o^f^t^h^{e HE}^A^an^d^repl^{aces t}^h^{e L}^o^an^F^o^rgi^v^en^{ess f}^o^{r Ch}ⁱ^l^d^Care^P^r^o^vⁱ^d^{ers p}^r^o^g^ra^m^,^w^hⁱ^c^h^h^a^{s b}^een
^rep^eal^ed^.
⁷⁶^T^h^e^L^o^aⁿ^R^e^pay^m^eⁿ^{t f}^o^r^Cⁱ^v^{il Le}^g^a^l^A^s^sⁱ^s^t^aⁿ^c^e^A^ttorⁿ^ey^s^pr^og^r^a^m^w^a^s^eⁿ^a^c^t^e^d^unde^r^t^h^e^H^E^O^A^.

Amortization: To provide for the gradual reduction and ultimate elimination of a debt through
periodic payments sufficient in size to cover interest due and reduce the amount of principal owed
over a specified repayment period.
Bond Equivalent Rate: The interest rate on Treasury bills is commonly reported on a “bank
discount basis,” a measure that is calculated based upon the face value of a Treasury bill at
maturity (as opposed to the purchase price). The bond equivalent rate is the interest payment
determined as a percentage of purchase price.
Capitalizing Interest: To add accumulating interest to the loan principal thereby increasing the
total amount of the loan on which interest is charged. Capitalization of accrued interest would
typically occur at one or more intervals when a borrower is not required to make regular interest
payments.
Interest: A charge for borrowed money, generally a percent of the amount borrowed.
Negative Amortization: When required payments on a loan are not sufficient in size to cover
accrued interest and unpaid interest is added to loan principal—increasing the borrower’s debt (a
scenario that can occur under income-contingent repayment).
Principal: The amount of money borrowed.
91-day Treasury bill: A short term promissory note issued by the U.S. Treasury, secured by the
full faith and credit of the United States. Treasury bills are issued by the federal government as a
means of financing deficits and managing cash flows and are generally viewed as risk-free
investments. A 91-day Treasury bill has a maturity of 13 weeks, and the rate for 91-day Treasury
bills is determined when the Treasury auctions the 91-day Treasury bill, typically on the first
business day of the week.
Variable Interest: Rate of interest on a loan that is tied to an index (such as the 91-day Treasury
bill), and adjusted periodically in accordance with changes in the index.

Table B-1. Annual Loan Limits for Borrowers of Stafford Loans and PLUS Loans, by
Dependency Status and Grade Level
^Borro^wer^Subsidized^{Total Subsidized &}^Unsubsidized^PLUS
^{Dependency Status And}^{Stafford L}^oans^{Stafford L}^oans^Loans
^{Grade Level}^($)^($)^($)
^{Dependent Undergrad}^uate
^{Annual loan limits}
¹^st^year^3,50⁰^5,50⁰^n.a.
²^nd^year^4,50⁰^6,50⁰^n.a.
³^rd^{year a}^{nd above}^5,50⁰^7,50⁰^n.a.
^{Preparatory co}^ursework^{for u}^ndergraduate^2,62^{5 2,62}⁵^n.a.
^{degree or certificate p}^rogram
^{Preparatory co}^ursework^{for gra}^{duate or}^a^5,50^{0 5,50}⁰^n.a.
^{professional program}
^{Teacher ce}^rtification^a^5,50⁰^5,50^n.a.
^{Aggregate loan limits}^cd
^{In ge}^neral^23,0⁰⁰^31,0⁰⁰^n.a.
^{Independent Underg}^radu^ate^b
^{Annual loan limits}
¹^st^year^3,50⁰^9,50⁰^n.a.
²^nd^year^4,50⁰^10,5⁰⁰^n.a.
³^rd^{year a}^{nd above}^5,50⁰^12,5⁰⁰^n.a.
^{Preparatory co}^ursework^{for u}^ndergraduate^2,62^{5 8,62}⁵^n.a.
^{degree or certificate p}^rogram
^{Preparatory co}^ursework^{for gra}^{duate or}^a^5,50^{0 12,5}⁰⁰^n.a.
^{professional program}
^{Teacher ce}^rtification^a^5,50⁰^12,5⁰⁰^n.a.
^{Aggregate loan limits}^cd
^{In ge}^neral^23,0⁰⁰^57,5⁰⁰^n.a.
^{Graduate and}^Pro^fessional
^{Annual loan limits}
^{In ge}^neral^8,50⁰^20,5⁰⁰^{Up to COA-}^EFC^e
^{Health p}^{rofessions p}^rograms^f^8,50⁰^40,5^{00 to 4}^7,1⁶⁷^{Up to COA-}^EFA^e
^{Health p}^{rofessions p}^rograms^g^8,50⁰^33,0^{00 to 3}^7,1⁶⁷^{Up to COA-}^EFA^e

^Borro^wer^Subsidized^{Total Subsidized &}^Unsubsidized^PLUS
^{Dependency Status And}^{Stafford L}^oans^{Stafford L}^oans^Loans
^{Grade Level}^($)^($)^($)
^{Aggregate loan limits}^cd
^{In ge}^neral^65,5⁰⁰^138,⁵⁰⁰^{Not limited}^e
^{Health p}^{rofessions p}^rograms^65,5⁰⁰^224,⁰⁰⁰^{Not limited}^e
^{Parents of Dependent Under}^gradu^{ate Students}
^{Annual loan limits}
^All^n.a.^n.a.^{Not limited}^e
^{Aggregate loan limits}^cdh
^{In ge}^neral^n.a.^n.a.^{Not limted}^e
^Sources:^H^{EA, §§ 428 a}^{nd 4}^28H^{; 34 CFR 6}^82.2^{04; a}^{nd Departm}^e^{nt of Edu}^{cation, Office of Postsec}^{ondary Education,}
^{Dear Colleague Letters G}^EN-0^5-^{09, G}^EN-0^8-0^{4, and G}^EN-0^8-0^8.
^Note:^{“n.a.” means not applicable.}
^a.^{For individuals who have obtaine}^{d a baccalaureate}^degree.
^b.^{These loan limits also apply to dependent}^u^ndergraduate^studen^ts^{whose pare}^{nts a}^{re u}^{nable to obt}^{ain PLUS}
^Loans.
^c.^{Accrued inte}^{rest and oth}^{er c}^harg^{es that}^{have not}^been^{capitalized do not count toward aggregate l}^oan
^limits.
^d.^{Stafford Loans that}^have^{been i}ⁿ^c^{luded in Consolidat}^{ion Loans are}^{attributed to the}^{aggregate limits for}
^{Subsidized Stafford Loans and Total Stafford Loans according to th}^{eir proportionate amou}^{nt of the}
^Consolidat^{ion Loan.}
^e.^{There is no stat}^{utory bor}^{rowing limit for PLUS Loans; however, borrowers must}^{be c}^redit-worthy^{and all}
^{aid combined may not exc}^{eed COA.}
^f.^{Students en}^{rolled in programs in}^{the following discipl}^{ines are eligible to borrow an additional $20,0}^{00 more}
^{than r}^{egular st}^{udents in}^Uns^ubsid^{ized Stafford Loans for programs}^{with nine-month}^{academic years,}^{and an}
^additi^{onal $26,66}^{7 for}^programs^{with 12-mont}^{h academic yea}^{rs: Doctor of All}^{opathic Medicine, Doctor of}
^{Osteopathic Medicine, Doctor of Dentistry, Doctor of Veterinary}^{Medicine, Doctor of Optometry, Doctor}
^{of Podiatric Medic}^{ine; and effecti}^{ve May}^{1, 20}^{05, Doctor of Nat}^ur^{opathic Medicine, and Doctor of}
^Naturopat^{hy. (Amounts}^are^pror^{ated for 10- a}^{nd 1}^1-month^progr^ams.)
^g.^{Students en}^{rolled in programs in}^{the following discipl}^{ines are eligible to borrow an additional $12,5}^{00 more}
^{than r}^{egular st}^{udents in}^Uns^ubsid^{ized Stafford Loans for programs}^{with nine-month}^{academic years,}^{and an}
^additi^{onal $16,66}^{7 for}^programs^{with 12-mont}^{h academic yea}^{rs: Doctor of Pharmacy, Graduate}ⁱⁿ^Public
^{Health, Doctor of Chiropractic, Doctoral Degree in Clinical}^{Psychology, Masters or Doctoral Deg}^{ree in}
^{Health Administration. (Amounts}^{are prorated}^{for 1}^{0- and}^11-mo^nth^programs.)
^h.^{Aggregate loan limits for graduate and profe}^{ssional students in}^clu^{de amounts}^{borrowed for u}^nder^graduate
^loans.

Table B-2. History of Annual Loan Limits for Stafford Loans and PLUS Loans,
by Borrower Type
^{Independent Gradu}^ate^{Parents of Dependent}
^Underg^{raduate Students}^{and Pr}^ofessional^Underg^{raduate Students}
^Students
^Dependent^a^{Independent Underg}^radu^ate^a^Time
^Underg^raduate^Period
^ClassLevel^Total^{Subsidized &}^Total^{Subsidized &}^Subsidized^{Total Subsidized}
^Subsidized^b^Unsubsidized^{Subsidized Stafford}^b^Unsubsidized^Borro^wer^Stafford^{& Unsubsidized}^PLUS^PLUS
^{Stafford L}^oans^Stafford^Loans^Stafford^Type^Loans^b^{Stafford L}^oans^b^Loans^Loans
^Loans^b^Loans^b
^{Nov. 8,}
¹⁹⁶^{5 to}^In^gen^eral^1,00⁰^{n.a. 1,00}^{0 n.a.}^In^gen^eral^1,50⁰^n.a.^n.a.^n.a.
^{Feb. 28,}
ⁱ^{ki/CRS-R40122}¹⁹⁷³
^g/w^{Mar. 1,}
^s^.or¹⁹⁷^{3 to}
^le^ak^Sept.^In^gen^eral^2,50⁰^{n.a. 2,50}^{0 n.a.}^In^gen^eral^2,50⁰^n.a.^n.a.^n.a.
^30,
^://wiki¹⁹⁷⁶
^h^ttp^{Oct. 1,}
¹⁹⁷^{6 to}
^Sept.^In^gen^eral^2,50⁰^{n.a. 2,50}^{0 n.a.}^In^gen^eral^5,00⁰^n.a.^n.a.^n.a.
^30,
¹⁹⁸⁰
^{Oct. 1,}
¹⁹⁸⁰^to
^Sept.^In^gen^eral^2,50⁰^{n.a. 3,00}^{0 n.a.}^In^gen^eral^5,00⁰^n.a.^n.a.^3,00⁰
^30,
¹⁹⁸¹^c
^{Oct. 1,}
¹⁹⁸^{1 to}
^Dec.^In^gen^eral^2,50⁰^{n.a. 2,50}^{0 n.a.}^In^gen^eral^5,00⁰^n.a.^n.a.^3,00⁰

^31,^c
¹⁹⁸⁶

^30,³^rd^{yr. & u}^p^5,50⁰^5,50⁰^5,50⁰^10,5⁰⁰^Health^8,50⁰^38,5^{00 to 4}^5,1⁶⁷

^{Independent Gradu}^ate^{Parents of Dependent}
^Underg^{raduate Students}^{and Pr}^ofessional^Underg^{raduate Students}
^Students
^Dependent^{Independent Underg}^radu^ate^a
^Underg^raduate^a^Time^Period
^ClassLevel^Total^{Subsidized &}^Total^{Subsidized &}^Subsidized^{Total Subsidized}
^Subsidized^b^Unsubsidized^{Subsidized Stafford}^b^Unsubsidized^Borro^wer^Stafford^{& Unsubsidized}^PLUS^PLUS
^{Stafford L}^oans^Stafford^Loans^Stafford^Type^Loans^b^{Stafford L}^oans^b^Loans^Loans
^Loans^b^Loans^b
^{Prep. u-}^2,62^{5 2,62}⁵^2,62⁵^6,62⁵^professions^e²⁰⁰⁸^f
^grad.
^{Prep. grad.}^5,50⁰^5,50⁰^5,50⁰^10,5⁰⁰^Health
^Teacher^5,50^{0 5,50}⁰^5,50⁰^10,5⁰⁰^professions^f^8,50⁰^31,0^{00 to 3}^5,1⁶⁷
^cert.
ⁱ^{ki/CRS-R40122}¹^st^yr.^3,50⁰^5,50⁰^3,50⁰^9,50⁰^{In gen}^eral^8,50⁰^20,5⁰⁰
^g/w²^nd^yr.^4,50⁰^6,50⁰^4,50⁰^10,5⁰⁰
^s^.or^rd
^le^ak³^{yr. & u}^p^5,50⁰^7,50⁰^5,50⁰^12,5⁰⁰^Health^{July 1,}^{Up to}^{Up to}
^{Prep. u-}^2,62^{5 2,62}⁵^2,62⁵^8,62⁵^professions^e^8,50⁰^40,5^{00 to 4}^7,1⁶⁷²⁰⁰^{8 to}^COA-^COA-
^://wiki^grad.^prese^nt^f^EFA^EFA
^h^ttp^{Prep. grad.}^5,50⁰^5,50⁰^5,50⁰^12,5⁰⁰
^Health^f^8,50⁰^33,0^{00 to 3}^7,1⁶⁷
^Teacher^5,50^{0 5,50}⁰^5,50⁰^12,5⁰⁰^professions
^cert.
^Source:^H^{EA, §§ 428, 4}^{28A, 4}²⁸^{B, and 428}^{H; P.L. 89-3}^{29; P.L. 90-}^{575; P.L. 9}^2-31^{8; P.L. 92-3}^{91; P.L.}^94-4^{82; P.L. 9}^5-56^{6; P.L. 96-3}^74;^P^{.L. 97-35; P.L. 99-}⁴⁹^{8; P.L. 100-}^{297; P.L.}
^102-³²^{5; P.L. 102-}³²^{5; P.L. 103-}⁶^{6; P.L. 105-2}^{44; P.L. 1}^09-1^{71; P.L.}¹¹^0-22⁷^{; Depar}^{tment of}^Educati^{on, Office of Postsecondary Ed}^uc^{ation, Dear Col}^{league Letters}^GE^N-96-1^4;
^GEN-^97-1^{4, G}^EN-0^5-0^{9, and G}^E^N-08-0^{8; 4}⁵^{C.F.R. § 177.14(a)(3)}⁽¹⁹⁶^{7 edition).}
^Note:^{“n.a.” means not applicable.}
^a.^{Undergraduate st}^udents^first^bec^{ame categorized as either depe}ⁿ^{dent or indepe}^{ndent st}^{udents e}^f^f^{ective Oct. 1, 1}⁹⁸^0.
^b.^{Subsidized Stafford Loans were r}^{eferred to as}^Guara^{nteed Studen}^{t Loans u}^{ntil July 1, 1}⁹⁸^{8. Prior to Nov. 1, 197}^{8, interest}^su^bs^{idies on Gua}^{ranteed Stude}^{nt Loans}
^{were available only borrowers w}^{hose family income was below sp}^{ecified income ceilings. Effective Nov. 1, 19}^{78, income ceilings}^on^Guara^{nteed Student}^{Loans we}^re
^{removed. In addition, since the e}^nactment^{of the}^{HEA in}¹⁹⁶^{5, federal student loans}^have^{been a}^uth^{orized under a parallel loan}^progr^{am, the Federally Insu}^{red Student}
^{Loan (FISL) program. FISL p}^{rogram loans are not c}^urre^{ntly being}^{made; however, during ma}^ny^peri^{ods throughout t}^he^{history of th}^{e program, FISL loan limits}
^{paralleled those for GSLs and Sta}^{fford Loans.}

^c.^{For the period from Ja}^{n. 1, 1}⁹⁸¹^{to Dec. 31, 19}^{86, federal st}^udent^{loans were also available to inde}^pendent^u^{ndergraduate a}^{nd g}^rad^{uate and}^{professional stude}^nts
^{under a}^separat^{e loan program}^c^{alled the Auxiliary Loans to Assist Students (ALAS) program. The}^{annual loan limit for ALAS prog}^ra^{m loans was $2,}⁵⁰^{0. This loan li}^mit
^{was separate}^{from t}^{he limit on G}^{uaranteed St}^{udent Loan}^s.
^d.^{For the period from Ja}^{n. 1, 1}⁹⁸⁷^{to June}^{30, 1}⁹⁹^{4, federal st}^udent^{loans were also available under a}^{separate loan}^{program call}^{ed the}^Suppleme^{ntal Loans for Stude}^nts
^{(SLS) program. During the}^{period from Jan.}^{1, 19}^{87 to}^Ju^{ne 3}^{0, 19}⁹^{3, the an}^{nual loan limit for SLS pr}^{ogram loans was $4,0}^00.
^e.^{For SLS program loans, during th}^{e period from July}^{1, 1}⁹⁹³^u^{ntil June}^{30, 1}⁹⁹^{4, an}^{nual loan limits were $}^4,00^{0 for}^undergrad^uat^{e s}^{tudents in t}^{heir first or}^{second y}^ear
^{of studies, $5,00}^{0 for}^underg^radu^{ate students}^{in their t}^{hird or high}^{er year of st}^{udies, and $1}^0,00^{0 fo}^{r graduate a}^{nd profe}^ssion^{al stude}^{nts. The SLS program}^was
^{repealed effective J}^uⁿ^e³^{0, 19}^94.
^f.^{In accordan}^{ce with a}^{uthority p}^{rovided the Secretary}^underP.L. 104-134^{, eff}^{ective July}^{1, 19}^{96, in}^{creased Uns}^{ubsidized Stafford Loan borrowing limits were e}^xtend^ed
^{to students w}^{ho became}^u^{nable t}^o^{borrow under}^the^{Health Ed}^uc^{ation Assistance Loan (H}^{EAL) p}^r^ogram.
^g.^{Students en}^{rolled in programs in}^{the following discipl}^{ines are eligible to borrow an additional $20,0}^{00 more t}^han^regular^studeⁿ^{ts in}^Unsu^{bsidized Stafford Loans for}
^{programs with}^nine-mont^{h acade}^{mic years, and an additional $26,}⁶⁶⁷^{for p}^{rograms with}^12-mont^h^{academic years: Doctor of Allop}^at^{hic Medicine, Doctor of}
^{Osteopathic Medicine, Doctor of Dentistry, Doctor of Veterinary}^{Medicine, Doctor of Optometry, Doctor of Pod}^{iatric Medicine; an}^{d effective May}^{1, 2}⁰⁰^{5, Doctor of}
^Naturopat^{hic Medicine, and Doctor of Naturopat}^{hy. (Amount}^{s are}^{prorated for}^{10- a}^{nd 1}^1-month^programs.).
^h.^{Students en}^{rolled in programs in}^{the following discipl}^{ines are eligible to borrow an additional $12,5}^{00 more t}^han^regular^studeⁿ^{ts in}^Unsu^{bsidized Stafford Loans for}
^{programs with}^nine-mont^{h acade}^{mic years, and an additional $16,}⁶⁶⁷^{for p}^{rograms with}^12-mont^h^{academic years: Doctor of Phar}^mac^{y, Graduate i}ⁿ^{Public Health,}
ⁱ^{ki/CRS-R40122}^{Doctor of Chiropractic, Doctora}^{l Degree in Clinical Psychology}^{, Masters or Doctoral Degree in}^{Health Administration. (Amounts}^a^{re prorated}^{for 1}^{0- and}^11-mo^nth^programs.).
^g/w
^s^.orTable B-3. History of Aggregate Loan Limits for Stafford Loans and PLUS Loans,
^le^akby Borrower Type
^://wiki^Underg^{raduate Students}^{Parents of}
^h^ttp^{Independent Gradu}^{ate and P}^rofessional^Dependent
^{Dependent Undergrad}^uate^a^Independent^Underg^radu^ate^a^Underg^raduate^Students^Time
^Period
^Subsidized^{Total Subsidized}^Subsidized^{Total Subsidized}^Borro^wer^Subsidized^{Total Subsidized}^PLUS^PLUS
^Stafford^b^{& Unsubsidized}^b^Stafford^b^{& Unsubsidized}^b^Type^Stafford^b^{& Unsubsidized}^b^Loans^Loans
^Loans^{Stafford L}^oans^Loans^{Stafford L}^oan^s^Loan^s^{Stafford L}^oans
^{Nov. 8,}
¹⁹⁶^{5 to}^7,50⁰^n.a.^7,50^{0 n.a.}^In^gen^eral^7,50^{0 n.a.}^n.a.^n.a.
^{Feb. 28,}
¹⁹⁷³
^{Mar. 1,}
¹⁹⁷^{3 to}^7,50^{0 n.a.}^7,50⁰^n.a.^In^gen^eral^10,0⁰⁰^n.a.^n.a.^n.a.

^{Sept. 30,}
¹⁹⁷⁶

²⁰⁰^{7 to}^limited

^Underg^{raduate Students}^{Parents of}
^{Independent Gradu}^{ate and P}^rofessional^Dependent^Underg^raduate
^{Dependent Undergrad}^uate^a^Independent^Underg^radu^ate^a^Students^Time
^Period
^Subsidized^{Total Subsidized}^Subsidized^{Total Subsidized}^Borro^wer^Subsidized^{Total Subsidized}^PLUS^PLUS
^Stafford^{& Unsubsidized}^Stafford^{& Unsubsidized}^Type^Stafford^{& Unsubsidized}^Loans^Loans
^Loans^b^{Stafford L}^oans^b^Loans^b^{Stafford L}^oan^s^b^Loan^s^b^{Stafford L}^oans^b
^{June 30,}^f^Health^65,0^{00 189,}¹²⁵^Not
²⁰⁰⁸^professions^limited
^{In gen}^eral^65,5⁰⁰^138,⁵⁰⁰^Not^limited^{July 1,}
²⁰⁰^{8 to}^23,0⁰⁰^31,0^{00 23,0}^{00 57,5}⁰⁰^{Not limited}
^prese^nt^Health^65,5^{00 224,}⁰⁰⁰^Not
^professions^limited
^Source:^H^{EA, §§ 428, 4}^{28A, 4}²⁸^{B, and 428}^{H; P.L. 89-3}^{29; P.L. 90-}^{575; P.L. 9}^2-31^{8; P.L. 92-3}^{91; P.L.}^94-4^{82; P.L. 9}^5-56^{6; P.L. 96-3}^74;^P^{.L. 97-35; P.L. 99-}⁴⁹^{8; P.L. 100-}^{297; P.L.}
^102-³²^{5; P.L. 102-}³²^{5; P.L. 103-}⁶^{6; P.L. 105-2}^{44; P.L. 1}^09-1^{71; P.L.}¹¹^0-22⁷^{; Depar}^{tment of}^Educati^{on, Office of Postsecondary Ed}^uc^{ation, Dear Col}^{league Letters}^GE^N-96-1^4;
ⁱ^{ki/CRS-R40122}^GEN-^97-1^{4, G}^EN-0^5-0^{9, and G}^E^N-08-0^{4; 4}⁵^{C.F.R. § 177.14(a)(3)}⁽¹⁹⁶^{7 edition).}
^g/w^Note:^{”n.a.” means not applicable.}
^s^.or^a.^{Undergraduate st}^udents^first^bec^{ame categorized as either depe}ⁿ^{dent or indepe}^{ndent st}^{udents e}^f^f^{ective Oct. 1, 1}⁹⁸^0.
^le^ak^b.^{Subsidized Stafford Loans were r}^{eferred to as}^Guara^{nteed Studen}^{t Loans u}^{ntil July 1, 1}⁹⁸^{8. Prior to Nov. 1, 197}^{8, interest}^su^bs^{idies on Gua}^{ranteed Stude}^{nt Loans}
^://wiki^{were available only borrowers w}^{hose family income was below sp}^{ecified income ceilings. Effective Nov. 1, 19}^{78, income ceilings}^on^Guara^{nteed Student}^{Loans we}^re^{removed. In addition, since the e}^nactment^{of the}^{HEA in}¹⁹⁶^{5, federal student loans}^have^{been a}^uth^{orized under a parallel loan}^progr^{am, the Federally Insu}^{red Student}
^h^ttp^{Loan (FISL) program. FISL p}^{rogram loans are not c}^urre^{ntly being}^{made; however, during ma}^ny^peri^{ods throughout t}^he^{history of th}^{e program, FISL loan limits}
^{paralleled those for GSLs and Sta}^{fford Loans.}
^c.^{For the period from Ja}^{n. 1, 1}⁹⁸¹^{to Dec. 31, 19}^{86, federal st}^udent^{loans were also available to inde}^pendent^u^{ndergraduate a}^{nd g}^rad^{uate and}^{professional stude}^nts
^{under a}^separat^{e loan program}^c^{alled the Auxiliary Loans to Assist Students (ALAS) program. ALA}^{S program loans had a}^{career loa}^{n limit of $12,5}^{00. This loan limit}
^{was separate}^{from t}^{he limit on G}^{uaranteed St}^{udent Loan}^s.
^d.^{For the period from Ja}^{n. 1, 1}⁹⁸⁷^{to June}^{30, 1}⁹⁹^{4, federal st}^udent^{loans were also available under a}^{separate loan}^{program call}^{ed the}^Suppleme^{ntal Loans for Stude}^nts
^{(SLS) program. The aggregate loan limit for SLS program loans was}^$2^0,00^0.
^e.^{In accordan}^{ce with a}^{uthority p}^{rovided the Secretary}^{under P.L. 1}⁰^4-13^{4, effective J}^{uly 1,}¹⁹^{96, incr}^{eased Unsu}^{bsidized Stafford}^{Loan borrowing limits were exte}^nded
^{to students w}^{ho became}^u^{nable t}^o^{borrow under}^the^{Health Ed}^uc^{ation Assistance Loan (H}^{EAL) p}^r^{ogram. On Dec. 1, 1}⁹⁹^{7, aggrega}^{te l}^{oan limits of $189,5}^{00 we}^re
^{established for borrowe}^{rs en}^roll^{ed in certain h}^{ealth p}^{rofessions p}^rograms.
^f.^{In accordan}^{ce with a}^{uthority p}^{rovided the Secretary}^{under P.L. 1}⁰^4-13^{4, effective J}^{uly 1,}¹⁹^{96, incr}^{eased Unsu}^{bsidized Stafford}^{Loan borrowing limits were exte}^nded
^{to students w}^{ho became}^u^{nable t}^o^{borrow under}^the^{Health Ed}^uc^{ation Assistance Loan (H}^{EAL) p}^r^{ogram. Effective Ap}^{r. 14,}²⁰^{08, ag}^g^{regate loan limits of $224,0}⁰⁰
^{were established for}^borrowers^{enrolled in certain health}^professi^{ons programs.}

Table B-4. History of Stafford Loan Fixed Interest Rates and Variable Interest Rate
Formulas
^{Fixed Inter}^{est Rate or Variable Interest Rate}^{Formula in}^Effect^a^Disbursement
^Period^Subsidized^Unsubsidized^b
^{Stafford L}^oans^{Stafford L}^oans
^{November 8,}¹⁹⁶⁵^-^{6% fixed}^rate^c^n.a.
^{August 2,}¹⁹⁶⁸
^{August 3,}¹⁹^68-^{7% fixed}^rate^c^n.a.
^{December 31,}¹⁹⁸⁰
^Janua^{ry 1,}¹⁹^81-^{9% or}^{8% fixed}^rate^d^n.a.
^{June 30, 19}⁸⁸
^{July 1, 1}⁹⁸^8-^{8% fixed}^{rate for first}⁴⁸^mont^hs;^{10% fixed}^{rate for}^{remaining repa}^yment^{8% fixed}^{rate for first}⁴⁸^mont^hs;^{10% fixed}^{rate for}^{remaining repa}^yment
^September³^{0, 19}⁹²^period^period^e
^{October 1,}¹⁹^92-^{91-day T-bill + 3.1% (cap}^{ped at}⁹^%)^{91-day T-bill + 3.1% (cap}^{ped at}⁹^%)
^{June 30, 19}⁹⁴
^{July 1, 1}⁹⁹^4-^{91-day T-bill + 3.1% (cap}^{ped at}^8.25%)^{91-day T-bill + 3.1% (cap}^{ped at}^8.25%)
^{June 30, 19}⁹⁵
^{91-day T-bill + 2.5% (cap}^{ped at}^{8.25%) for}^{91-day T-bill + 2.5% (cap}^{ped at}^{8.25%) for}
^{July 1, 1}⁹⁹^5-^{in-school, grace, and deferment}^p^eriods;^and^{in-school, grace, and deferment}^p^eriods;^and
^{June 30, 19}⁹⁸^{91-day T-bill + 3.1% (cap}^{ped at}^{8.25%) for}^{91-day T-bill + 3.1% (cap}^{ped at}^{8.25%) for}
^repayme^{nt pe}^riods^repayme^{nt pe}^riods
^{91-day T-bill + 1.7% (cap}^{ped at}^{8.25%) for}^{91-day T-bill + 1.7% (cap}^{ped at}^{8.25%) for}
^{July 1, 1}⁹⁹^8-^{in-school, grace, and deferment}^p^eriods;^and^{in-school, grace, and deferment}^p^eriods;^and
^{June 30, 20}⁰⁶^{91-day T-bill + 2.3% (cap}^{ped at}^{8.25%) for}^{91-day T-bill + 2.3% (cap}^{ped at}^{8.25%) for}
^repayme^{nt pe}^riods^repayme^{nt pe}^riods
^{July 1, 2}⁰⁰^6-^{6.8% fixed}^rate^{6.8% fixed}^rate
^{June 30, 20}⁰⁸
^{6.0% fixed}^{rate for}^underg^raduat^{e students;}^{6.8% fixed}^rate
^{July 1, 2}⁰⁰^8-^and
^{June 30, 20}⁰⁹^{6.8% fixed}^{rate for grad}^{uate and}
^{professional student}^s
^{5.6% fixed}^{rate for}^underg^raduat^{e students;}^{6.8% fixed}^rate
^{July 1, 2}⁰⁰^9-^and
^{June 30, 20}¹⁰^{6.8% fixed}^{rate for grad}^{uate and}
^{professional student}^s
^{4.5% fixed}^{rate for}^underg^raduat^{e students;}^{6.8% fixed}^rate
^{July 1, 2}⁰¹^0-^and
^{June 30, 20}¹¹^{6.8% fixed}^{rate for grad}^{uate and}
^{professional student}^s
^{3.4% fixed}^{rate for}^underg^raduat^{e students;}^{6.8% fixed}^rate

^{July 1, 2}⁰¹^1-^and
^{June 30, 20}¹²^{6.8% fixed}^{rate for grad}^{uate and}
^{professional student}^s

^{Fixed Inter}^{est Rate or Variable Interest Rate}^{Formula in}^Effect^a
^Disbursement
^Period^Subsidized^Unsubsidized
^{Stafford L}^oans^{Stafford L}^oans^b
^{On or afte}^r^{6.8% fixed}^rate^{6.8% fixed}^rate
^{July 1, 2}⁰¹²
^Source:^H^{EA §§ 427A,}⁴²^{8, and}⁴⁵⁵⁽^{b); (20 U.S.C. §§ 1077a, 1}⁰⁷⁸^{and 1}⁰⁸^7e(b)).
^Note:^{“n.a.” means not applicable.}
^a.^Interest^{rates s}^{hown ar}^{e rates}^{for new}^{borrowers with}^{no outsta}^{nding loan balance at t}^{he time of}
^disburseme^{nt. Prior to July 1, 1}⁹^{94, different}^proced^{ures for}^{determining interest}^{rates a}^{pplied to new}
^{borrowers a}^{nd existing bor}^rowers.
^b.^Unsu^{bsidized Stafford Loans first became available Oct. 1, 1}⁹⁹^2.
^c.^{For loans made prior to Dec. 15, 19}^{68, bor}^{rowers whose adjuste}^{d family income was less than}^$1^5,00^{0 at}
^{the time of disbu}^rsement^{were el}^{igible to have 3 pe}^rcentage^points^{of their interest}^{paid on their}^be^{half by}
^{the federal gover}^nment.
^d.^{During this}^{period, loans to new borrowers wer}^{e made at a}^{9% in}^{terest rate, u}^{nless for a}^ny¹²^-mo^nth
^{period beginning on}^{or after}^Jan.^{1, 19}^{81, th}^{e average}^{bond eq}^{uivalent rate of}^{91-day Treas}^ury^bills
^{auctioned during t}^{hat 1}^2-month^{period is less than}^{9%, in whic}^{h c}^{ase loans were made at a}ⁿ⁸^%^int^erest
^{rate. (Also during this period, loa}^{ns to existing}^{borrowers of loans}^{with interest}^{rates tha}^{t did not exceed}
^{7% were}^{made at a}^{7% inte}^{rest r}^ate.)

Table B-5. Stafford Loan Interest Rates in Effect, by Borrower Cohort:
1992-1993 to 2012-2013
^{Interest Rate P}^{eriod (July 1 to June 30)}
¹⁹⁹^2-¹⁹⁹^3-¹⁹⁹^4-¹⁹⁹^5-¹⁹⁹^6-¹⁹⁹^7-¹⁹⁹^8-¹⁹⁹^9-²⁰⁰^0-²⁰⁰^1-²⁰⁰^2-²⁰⁰^3-²⁰⁰^4-²⁰⁰^5-²⁰⁰^6-²⁰⁰^7-²⁰⁰^8-²⁰⁰^9-²⁰¹^0-²⁰¹^1-²⁰¹^2-
^rt^{Loan Description}¹⁹⁹³¹⁹⁹⁴¹⁹⁹⁵¹⁹⁹⁶¹⁹⁹⁷¹⁹⁹⁸¹⁹⁹⁹²⁰⁰⁰²⁰⁰¹²⁰⁰²²⁰⁰³²⁰⁰⁴²⁰⁰⁵²⁰⁰⁶²⁰⁰⁷²⁰⁰⁸²⁰⁰⁹²⁰¹⁰²⁰¹¹²⁰¹²²⁰¹³
^{6.00 6.00}^{6.00 6.00 6.00 6.00 6.00 6.00}^{6.00 6.00 6.00 6.00 6.00 6.00}^{6.00 6.00 6.00 6.00 6.00 6.00}^6.00
^{6% loans}
^7%^loans^{7.00 7.00}^{7.00 7.00 7.00 7.00 7.00 7.00}^{7.00 7.00 7.00 7.00 7.00 7.00}^{7.00 7.00 7.00 7.00 7.00 7.00}^7.00
^{Converted 7%}^loans^a^—^6.22^{7.00 7.00 7.00 7.00 7.00 7.00}^{7.00 6.79 4.86 4.22 4.17 6.10}^{7.00 7.00 5.01}^TBD^TBD^TBD^TBD
^9%^loans^{9.00 9.00}^{9.00 9.00 9.00 9.00 9.00 9.00}^{9.00 9.00 9.00 9.00 9.00 9.00}^{9.00 9.00 9.00 9.00 9.00 9.00}^9.00
^{Converted 9%}^loans^a^—^6.22^{7.43 8.92 8.26 8.26 8.26 7.72}^{8.99 6.79 4.86 4.22 4.17 6.10}^{7.94 8.02 5.01}^TBD^TBD^TBD^TBD
ⁱ^{ki/CRS-R40122}^8%^loans^{8.00 8.00}^{8.00 8.00 8.00 8.00 8.00 8.00}^{8.00 8.00 8.00 8.00 8.00 8.00}^{8.00 8.00 8.00 8.00 8.00 8.00}^8.00
^g/w^{Converted 8%}^loans^a^—^6.22^{7.43 8.00 8.00 8.00 8.00 7.72}^{8.00 6.79 4.86 4.22 4.17 6.10}^{7.94 8.00 5.01}^TBD^TBD^TBD^TBD
^s^.or¹^st⁴⁸^{8.00 8.00}^{8.00 8.00 8.00 8.00 8.00 8.00}^{8.00 8.00 8.00 8.00 8.00 8.00}^{8.00 8.00 8.00 8.00 8.00 8.00}^8.00
^le^ak^months^Converted
^8/10^%^b⁴⁹^th^month^10.0⁰^6.37^{7.58 9.07 8.41 8.41 8.41 7.87}^{9.14 6.94 5.01 4.37 4.32 6.25}^{8.09 8.17 5.16}^TBD^TBD^TBD^TBD
^://wiki^loans^{& after}
^h^ttp^st
¹⁴⁸^—^6.22^{7.43 8.00 8.00 8.00 8.00 7.72}^{8.00 6.79 4.86 4.22 4.17 6.10}^{7.94 8.00 5.01}^TBD^TBD^TBD^TBD^Converted
^months^8/10^%
^loans^a⁴⁹^th^month^{& after}^—^—^—^—^—^{8.26 8.26 7.72}^{8.99 6.79 4.86 4.22 4.17 6.10}^{7.94 8.02 5.01}^TBD^TBD^TBD^TBD
^{91-day T-bill + 3.1%}^{6.94 6.22}^{7.43 8.92 8.26 8.26 8.26 7.72}^{8.99 6.79 4.86 4.22 4.17 6.10}^{7.94 8.02 5.01}^TBD^TBD^TBD^TBD
^{(capped at}^9%)
^{91-day T-bill + 3.1%}^—^—^{7.43 8.25 8.25 8.25 8.25 7.72}^{8.25 6.79 4.86 4.22 4.17 6.10}^{7.94 8.02 5.01}^TBD^TBD^TBD^TBD
^{(capped at}^8.25%)
^{91-day T-}^In-school,^—^—^—^{8.25 7.66 7.66 7.66 7.12}^{8.25 6.19 4.26 3.62 3.57 5.50}^{7.34 7.42 4.41}^TBD^TBD^TBD^TBD

^{bill + 2.5%}^{grace, and}
^{(capped at}^8.25%)^deferment^periods

^{Interest Rate P}^{eriod (July 1 to June 30)}
¹⁹⁹^2-¹⁹⁹^3-¹⁹⁹^4-¹⁹⁹^5-¹⁹⁹^6-¹⁹⁹^7-¹⁹⁹^8-¹⁹⁹^9-²⁰⁰^0-²⁰⁰^1-²⁰⁰^2-²⁰⁰^3-²⁰⁰^4-²⁰⁰^5-²⁰⁰^6-²⁰⁰^7-²⁰⁰^8-²⁰⁰^9-²⁰¹^0-²⁰¹^1-²⁰¹^2-
^{rt Loan}^Description¹⁹⁹³¹⁹⁹⁴¹⁹⁹⁵¹⁹⁹⁶¹⁹⁹⁷¹⁹⁹⁸¹⁹⁹⁹²⁰⁰⁰²⁰⁰¹²⁰⁰²²⁰⁰³²⁰⁰⁴²⁰⁰⁵²⁰⁰⁶²⁰⁰⁷²⁰⁰⁸²⁰⁰⁹²⁰¹⁰²⁰¹¹²⁰¹²²⁰¹³
^{91-day T-}^—^—^—^{8.25 8.25 8.25 8.25 7.72}^{8.25 6.79 4.86 4.22 4.17 6.10}^{7.94 8.02 5.01}^TBD^TBD^TBD^TBD
^{bill + 3.1%}^Repayment
^{(capped at}
^8.25%)
^{91-day T-}^In-school,^—^—^—^—^—^—^{6.86 6.32}^{7.59 5.39 3.46 2.82 2.77 4.70}^{6.54 6.62 3.61}^TBD^TBD^TBD^TBD
^{bill + 1.7%}^{grace, and}
^{(capped at}^deferment
^8.25%)
^{91-day T-}^{bill + 2.3%}^—^—^—^—^—^—^{7.46 6.92}^{8.19 5.99 4.06 3.42 3.37 5.30}^{7.14 7.22 4.21}^TBD^TBD^TBD^TBD
^{(capped at}^Repayment
^8.25%)
^{— —}^{— — — — — —}^{— — — — — —}^6.80^6.80^6.80^6.80^6.80^6.80^6.80
ⁱ^{ki/CRS-R40122}^{6.8% loans}^{All Stafford}^Loans
^g/w
^s^.or^Undergrad.^{— —}^{— — — — — —}^{— — — — — —}^{— —}^6.00^6.00^6.00^6.00^6.00
^le^ak^{6.0% loans}^Sub.Staff
^://wiki^{6.8% loans}^{All other}^Stafford^{— —}^{— — — — — —}^{— — — — — —}^{— —}^6.80^6.80^6.80^6.80^6.80
^h^ttp
^{5.6% loans}^Undergrad.^Sub.Staff^{— —}^{— — — — — —}^{— — — — — —}^{— — —}^5.60^5.60^5.60^5.60
^{6.8% loans}^{All other}^Stafford^{— —}^{— — — — — —}^{— — — — — —}^{— — —}^6.80^6.80^6.80^6.80
^{4.5% loans}^Undergrad.^Sub.Staff^{— —}^{— — — — — —}^{— — — — — —}^{— — — —}^4.50^4.50^4.50
^{6.8% loans}^{All other}^{— —}^{— — — — — —}^{— — — — — —}^{— — — —}^6.80^6.80^6.80
^Stafford
^{3.4% loans}^Undergrad.^Sub.Staff^{— —}^{— — — — — —}^{— — — — — —}^{— — — — —}^3.40^3.40
^{6.8% loans}^{All other}^Stafford^{— —}^{— — — — — —}^{— — — — — —}^{— — — — —}^6.80^6.80
^{6.8% loans}^{All Stafford}^{— —}^{— — — — — —}^{— — — — — —}^{— — — — — —}^6.80

ⁱ^{ki/CRS-R40122}
^g/w
^s^.or
^le^ak
^://wiki
^h^ttp

Table B-6. History of PLUS Loan Fixed Interest Rates and Variable Interest Rate
Formulas
^{Disbursement Period}^{Fixed Inter}^{est Rate or Variable Interest}^{Rate Formula in E}^ffect
^Janua^ry^{1, 19}^81-Septem^{ber 30, 1}⁹⁸¹^9%^{fixed rate}
^{October 1,}¹⁹^81-Octo^{ber 31,}¹⁹⁸²^{14% fixed}^rate
^November^{1, 1}⁹⁸^2-Ju^{ne 3}^{0, 1}⁹⁸⁷^12%^{fixed rate}
^{July 1, 1}⁹⁸^7-Septem^ber^{30, 1}⁹⁹²^{52-week T-}^{bill + 3.25}^{% (cap}^{ped a}^t^12%)^a
^October^{1, 19}^92-J^une^30,¹⁹⁹⁴^{52-week T-bill + 3.1% (ca}^{pped at}^10%)^a
^{July 1, 1}⁹⁹^4-Ju^ne^{30, 1}⁹⁹⁸^{52-week T-bill + 3.1% (ca}^{pped at}^9%)^a
^{July 1, 1}⁹⁹^8-Ju^ne^{30, 2}⁰⁰⁶^{91-day T-bill + 3.1% (cap}^{ped at}⁹^%)
^{8.5% fixed}^{rate for FFE}^{L progra}^m^loans;
^{On or afte}^{r J}^{uly 1, 2}⁰⁰⁶
^{7.9% fixed}^{rate for DL}^{program l}^oans
^Source:^H^{EA §§ 427A, a}^{nd 4}⁵⁵⁽^{b); (20 U.S.C. §§ 1077a, and 1}⁰⁸⁷^e(b)).
^a.^{The Consolidated Appropriations Act for FY20}⁰¹^{(P.L. 106-5}^{54) i}^{ncludes an a}^mendme^{nt to the}^HE^{A that}
^{changed t}^{he index}^{used in t}^{he for}^{mulas that deter}^{mine intere}^{st rat}^{es for PLUS Loans disbu}^{rsed be}^t^ween
^{July 1, 1}⁹⁸⁷^and^Ju^{ne 3}^{0, 1}⁹⁹^{8. The amendme}^{nt s}^ubstit^{uted the o}^{ne-year consta}^{nt mat}^{urity Treas}^u^{ry yield}
^{for the}^{52-week Treas}^ury^{bill. This change, whic}^{h affect}^{s interest}^r^{ate adjustments made}^{for any}¹^2-month
^{period beginning on}^{or after}^July^{1 of 2}⁰⁰^{1, became}^neces^sary^bec^{ause the}^Departme^{nt of Treas}^ury^stopped
^{issuing 5}^{2-week Treasu}^ry^bills.

Table B-7. PLUS Loan Interest Rates in Effect, by Borrower Cohort:
1992-1993 to 2012-2013
^Int^{erest Rate P}^{eriod (July 1 to June 30)}
^wer^Loan¹⁹⁹^2-¹⁹⁹^3-¹⁹⁹^4-¹⁹⁹^5-¹⁹⁹^6-¹⁹⁹^7-¹⁹⁹^8-¹⁹⁹^9-²⁰⁰^0-²⁰⁰^1-²⁰⁰^2-²⁰⁰^3-²⁰⁰^4-²⁰⁰^5-²⁰⁰^6-²⁰⁰^7-²⁰⁰^8-²⁰⁰^9-²⁰¹^0-²⁰¹^1-²⁰¹^2-
^Coho^rt^Description¹⁹⁹³¹⁹⁹⁴¹⁹⁹⁵¹⁹⁹⁶¹⁹⁹⁷¹⁹⁹⁸¹⁹⁹⁹²⁰⁰⁰²⁰⁰¹²⁰⁰²²⁰⁰³²⁰⁰⁴²⁰⁰⁵²⁰⁰⁶²⁰⁰⁷²⁰⁰⁸²⁰⁰⁹²⁰¹⁰²⁰¹¹²⁰¹²²⁰¹³
^{9.00 9.00}^{9.00 9.00 9.00 9.00 9.00 9.00}^{9.00 9.00 9.00 9.00 9.00 9.00}^{9.00 9.00 9.00 9.00 9.00 9.00}^9.00
^1-Sept.^{9% loans}
⁹⁸¹
^14.0^{0 14.0}⁰^14.0^{0 14.0}^{0 14.0}^{0 14.0}^{0 14.0}^{0 14.0}⁰^14.0^{0 14.0}^{0 14.0}^{0 14.0}^{0 14.0}^{0 14.0}⁰^14.0^{0 14.0}^{0 14.0}^{0 14.0}^{0 14.0}^{0 14.0}⁰^14.0⁰
^1-Oct.^{14% loans}
⁹⁸²
^12.0^{0 12.0}⁰^12.0^{0 12.0}^{0 12.0}^{0 12.0}^{0 12.0}^{0 12.0}⁰^12.0^{0 12.0}^{0 12.0}^{0 12.0}^{0 12.0}^{0 12.0}⁰^12.0^{0 12.0}^{0 12.0}^{0 12.0}^{0 12.0}^{0 12.0}⁰^12.0⁰
^2-Ju^ne^{12% loans}
⁹⁸⁷
ⁱ^{ki/CRS-R40122}^{52-wk. T-bill}^{7.51 6.79}^{8.53 9.13 8.87 9.13 8.68 8.13}^{9.63 6.71 5.38 4.20 5.41 6.65}^{8.49 8.20 5.82}^TBD^TBD^TBD^TBD
^g/w^7-Sept.^{+ 3.25}^%
^s^.or⁹⁹²^{(capped at}^12%)
^le^ak
^{52-wk. T-bill}^{7.36 6.64}^{8.38 8.98 8.72 8.98 8.53 7.98}^{9.48 6.56 5.23 4.05 5.26 6.50}^{8.34 8.05 5.67}^TBD^TBD^TBD^TBD
^://wiki^2-Ju^ne^{+ 3.1%}
^h^ttp⁹⁹⁴^{(capped at}^10%)
^{52-wk. T-bill}^—^—^{8.38 8.98 8.72 8.98 8.53 7.98}^{9.00 6.56 5.23 4.05 5.26 6.50}^{8.34 8.05 5.67}^TBD^TBD^TBD^TBD
^4-Ju^ne^{+ 3.1%}^{(capped at}
⁹⁹⁸^9%)
^{91-day T-bill}^—^—^—^—^—^—^{8.26 7.72}^{8.99 6.79 4.86 4.22 4.17 6.10}^{7.94 8.02 5.01}^TBD^TBD^TBD^TBD
^8-Ju^ne^{+ 3.1%}
⁰⁰⁶^{(capped at}
^9%)
^8.5%^FFEL^{— —}^{— — — — — —}^{— — — — — —}^8.50^8.50^8.50^8.50^8.50^8.50^8.50
^loans^uly
⁰⁶^7.9%^DL^{— —}^{— — — — — —}^{— — — — — —}^7.90^7.90^7.90^7.90^7.90^7.90^7.90

^loans

^Sources:^{U.S. Department of}^{Education, Office of Federal Studen}^{t Aid, FFEL historical Variable Interest rate P}^{ublications and histor}^ical^{Direct Loan Bulletins; and National}
^{Council of Higher Ed}^{ucation Loan Programs, “History of Variable}^Interest^{Rates-PLUS Loans.”}
^a.^{“TBD” means to be determined}^{at a fut}^{ure date.}

ⁱ^{ki/CRS-R40122}
^g/w
^s^.or
^le^ak
^://wiki
^h^ttp

Table B-8. History of Borrower Fees on Stafford Loans and PLUS Loans
^{FFEL Program}^Loans^{DL Progra}^{m Loans}
^{Stafford L}^oans^{PLUS Loans}^Stafford^Loans^{PLUS Loans}^Disbursement
^Period
^Origination^{Default Fee}^a^Origination^Default^a^Origination^Origination
^{Fee (%)}^(%)^{Fee (%)}^{Fee (%)}^{Fee (%)}^{Fee (%)}
^{Nov. 8, 19}^{65 to}^0.0^{Up to 0.5%}^{n.a. n.a.}^n.a.^n.a.
^{Aug. 13, 1}⁹⁷⁵^{per yea}^{r of}
^unpaid
^principal
^balance
^{Aug. 14, 1}⁹⁷⁵^to^0.0^{Up to 1%}^per^{n.a. n.a.}
^{Aug. 23, 1}⁹⁸¹^{year u}^{ntil loan}
^enters
^repayme^nt
^{Aug. 23, 1}⁹⁸¹^to^5.0^b^{Up to 1%}^per^n.a.^n.a.^n.a.
^{June 30, 19}⁸⁷^{year u}^{ntil loan}
^enters
^repayme^nt
^{July 1, 1}⁹⁸⁷^to^5.0^b^3.0^5.0^3.0
^{Sept. 30, 1}⁹⁹²
^Sub.^{5.0 3.0}^{Oct. 1, 19}⁹²^to^{5.0 3.0}^n.a.^n.a.
^Stafford^{June 30, 19}⁹⁴
^Unsu^b.^6.5^c^0.0^b
^Stafford
^{July 1, 1}⁹⁹⁴^to^3.0^{1.0 3.0}^{1.0 4.0}^4.0
^{June 30, 20}⁰⁶
^{July 1, 2}⁰⁰^6-Ju^ne^2.0^{1.0 3.0}^{1.0 3.0}^4.0
^{30, 2}⁰⁰⁷
^{July 1, 2}⁰⁰^7-Ju^ne^1.5^{1.0 3.0}^{1.0 2.5}^4.0
^{30, 2}⁰⁰⁸
^{July 1, 2}⁰⁰^8-Ju^ne^1.0^{1.0 3.0}^{1.0 2.0}^4.0
^{30, 2}⁰⁰⁹
^{July 1, 2}⁰⁰^9-Ju^ne^0.5^{1.0 3.0}^{1.0 1.5}^4.0
^{30, 2}⁰¹⁰
^{On or afte}^{r J}^uly^0.0^{1.0 3.0}^{1.0 1.0}^4.0
^{1, 20}¹⁰
^Source:^H^{EA, §§ 428(b), 4}^38(c),^{and 45}^{5(c); P.L. 89-3}^{29; P.L. 97-}³^{5; P.L. 99-49}^{8; P.L. 10}^2-32^{5; P.L. 103-}^{66; P.L. 10}^9-
^{171; P.L. 1}^10-2^27;⁴⁵^C.F.R.^{§ 17}^{7.12 (1}⁹⁶^{7 t}^hroug^{h 1}⁹⁷⁵^editions).
^a.^{Prior to July 1, 20}^{06, t}^{he default f}^{ee was refe}^{rred to as a}ⁿ^insu^ranc^{e premium.}
^b.^Pursua^{nt to}P.L. 99-177^{, t}^{he Balanced Budget and}^Emerge^{ncy Def}^{icit Control Act of 1985, origination fees}
^{were increased}^by^{0.5% to 5.}^{5% f}^{or loans disbursed be}^tween^Mar.^{1, 19}^{86 a}^{nd Sept. 3}^{0, 19}^{86, a}^{nd a}^gain
^between^{Oct. 1, 1}⁹⁸⁹^{and Dec.}³^{1, 19}^89.
^c.^{During the}^{period from Oct.}^{1, 1}⁹⁹²^thro^{ugh J}^uⁿ^e³^{0, 19}^{94, t}^{he c}^{ombined origination fee and insu}^r^ance
^{premium (defa}^{ult fee) on Un}^su^{bsidized Stafford Loans was 6.5%.}

Table B-9. History of Consolidation Loan Interest Rate Formulas
^Disbursement^{FFEL Consolidation Loa}^{n Int}^{erest Rate}^{DL Consolidation Lo}^{an Inter}^{est Rate}
^Period^{Formula in E}^ffect^{Formula in E}^ffect
^{October 17,}¹⁹⁸^6-^{Fixed rate:}^n.a.
^{June 30, 19}⁹⁴^{the greater}^{of the w}^{eighted avera}^{ge of}
^{interest rates}^{on the}^{loans consolidated,}
^{rounded to the}^nearest^{whole pe}^{rcent, or}
^9%
^{July 1, 1}⁹⁹^4-^{Fixed rate:}^{Direct Stafford Consolidat}^ions:
^{June 30, 19}⁹⁵^{the weighted averag}^{e of the in}^ter^{est rates on}^{Variable rate:}
^{the loans consolidated, rounded upward to}^{91-day T-bill + 3.1%, cap}^{ped at 8.}^25%
^{the nea}^{rest w}^{hole perce}^nt^{Direct PLUS Consoli}^dations:
^{Variable rate:}
^{52-week T-bill + 3.1%, ca}^{pped at}^9%^a
^{July 1, 1}⁹⁹^5-^{Fixed rate:}^{Stafford Consolidat}^{ion Loans:}
^{November 12, 19}⁹⁷^{the weighted averag}^{e of the in}^ter^{est rates on}^{Variable rate:}
^{the loans consolidated, rounded upward to}^{-in school, grace, or deferment: 9}^{1-day T-bill}^{+ 2.5%, ca}^{pped at}^8.25^%
^{the nea}^{rest w}^{hole perce}^nt^{-in repayme}^{nt or for}^bearan^{ce: 91}^{-day T-bil}^{l +}
^{3.1%, cap}^{ped at 8.2}^5%
^{PLUS Consoli}^{dation Loans:}
^{Variable rate:}^a
^{52-week T-bill + 3.1%, ca}^{pped at}^9%
^{November 13,}^{Variable Rate:}^b^{Stafford Consolidat}^{ion Loans:}
¹⁹⁹^7-Ju^{ne 30,}¹⁹⁹⁸^{91-day T-bill + 3.1% (cap}^{ped at}^8.25%)^{Variable rate:}
^{-in school, grace, or deferment: 9}^{1-day T-bill}
^{+ 2.5%, ca}^{pped at}^8.25^%
^{-in repayme}^{nt or for}^bearan^{ce: 91}^{-day T-bil}^{l +}
^{3.1%, cap}^{ped at 8.2}^5%
^{PLUS Consoli}^{dation Loans:}
^{Variable rate:}^a
^{52-week T-bill + 3.1%, ca}^{pped at}^9%
^{July 1, 1}⁹⁹^8-^{Variable Rate:}^{Stafford Consolidat}^{ion Loans:}
^September³^{0, 19}⁹⁸^{91-day T-bill + 3.1% (cap}^{ped at}^8.25%)^b^{Variable rate:}
^{-in school, grace, or deferment: 9}^{1-day T-bill}
^{+ 1.7%, ca}^{pped at}^8.25^%
^{-in repayme}^{nt or for}^bearan^{ce: 91}^{-day T-bil}^{l +}
^{2.3%, cap}^{ped at 8.2}^5%
^{PLUS Consoli}^{dation Loans:}
^{Variable rate:}
^{52-week T-bill + 3.1%, ca}^{pped at}^9%^a

^Disbursement^{FFEL Consolidation Loa}^{n Int}^{erest Rate}^{DL Consolidation Lo}^{an Inter}^{est Rate}
^Period^{Formula in E}^ffect^{Formula in E}^ffect
^{October 1,}¹⁹^98-^{Fixed rate:}^{Applications received 10/}^1/9^{8 to}^1/31/^99:
^prese^nt^{the weighted averag}^{e of interest}^{rates on th}^e^{Variable Rate:}
^{loans consolidated}^{, rounded to the nea}^rest^b^{91-day T-bill + 2.3%, cap}^{ped at 8.}^25%.
^{higher one-eight}^{h of 1}^{%, capp}^{ed at 8.25}^%

^{Applications received on or after}^2/1/¹⁹^99:
^{Fixed rate:}
^{the weighted averag}^{e of the in}^ter^{est rates on}
^{the loans consolidated, rounded to the}
^{nearest higher}^on^e-eighth^{of 1%, capped}^at
^8.25%.
^Source:^H^{EA §§ 427A}^{(20 U.S.C. § 1077a), 4}^{28C (}^{20 U.S.C. § 107}^{8-3), 45}^{5(b) (2}^{0 U.S.C. § 1087e(b}^{)); and 34 C.F.R. §}
^685.²⁰^2(a)(3).
^Note:^{“n.a.” means not applicable.}
^a.^{For outstanding Federal Direct PLUS Consolidat}^{ion Loans with ra}^{te setting form}^{ulas tied to the 5}²^-week
^Treasury^{bill, for periods beginning July}^{1, 20}^{01, t}^{he average}^week^{ly one-year constant}^matu^{rity Treasury}
^{yield was substituted for t}^he^bon^{d equivalent rate}^{of 5}^{2-week Tre}^asury^{bills. This change beca}^{me n}^ecessary
^because^{the De}^partme^{nt of Trea}^{sury decided to stop issuing}^52-w^{eek Treasur}^{y bills.}
^b.^{The interest}^{rate ap}^{plicable to th}^{e portion of an FFE}^{L progra}^{m Consolidati}^{on Loan rep}^resent^{ed by}^{a HEAL}
^{loan(s) is the average of the}^bond^equivalent^{rates of th}^{e 9}^{1-day Treasury}^{bills auctioned for the}^qua^rter
^{prior to July 1,}^{plus 3}^per^centage^{points, with no cap.}
^D^a^vⁱ^{d P.}^Sm^ol^e
^Sp^{ecialist i}ⁿ^Ed^u^catioⁿ^P^o^lic^y
^dsm^o^l^e^@^c^r^s^.l^oc.g^ov^{, 7-}⁰⁶²⁴