Student Loan Interest Rates Determined for 2005-2006 Academic Year

RESTON, Va., May 31 /PRNewswire/ -- Interest rates on federally guaranteed student loans will rise 1.93 percentage points when they reset on July 1, the first increase in five years and the largest single-year increase in the student loan program's 40-year history. Students, graduates and parents may be able to fix today's low interest rates by consolidating their education loans before June 30.

Federal Stafford Loans issued on or after July 1, 1998 automatically will be reset to an interest rate of 4.7 percent during in-school, grace and deferment periods, and 5.3 percent during repayment. Interest rates on Federal Parent Loans for Undergraduate Students (PLUS) issued on or after July 1, 1998 will be reset to 6.1 percent. These rates are in effect from July 1, 2005 through June 30, 2006.

Interest rates on Federal Stafford and PLUS Loans are variable and reset annually on July 1 based on the 91-day Treasury bill yield from the last auction in May, plus a margin of interest set by federal regulation. The U.S. Department of Education is expected to confirm the new rates -- calculated based on today's auction -- later this week. For loans issued after July 1, 1998, Stafford Loans are capped at 8.25 percent and PLUS Loans may not exceed 9 percent.

While rates may be on the rise, federal student loans are still the most economical way to finance a higher education. "It would be very unfortunate for families to hear this news and think they cannot afford college," said Tom Joyce, vice president of corporate communications for Sallie Mae. "Student loans carry competitive interest rates -- lower than other consumer loan classes -- and offer a number of other benefits, such as flexible repayment plans, deferment and forbearance options and tax deductibility."

In advance of the rate reset, Stafford and PLUS Loan borrowers may consider student loan consolidation, which involves paying off current federal education loans in full and creating a new loan. The new loan features a fixed interest rate calculated as the weighted average of the rates of the loans consolidated, adjusted up to the nearest 0.125 percent, and not to exceed 8.25 percent. Borrowers who apply for consolidation before June 30, 2005 can potentially consolidate their loans at an interest rate of 2.875 percent for the duration of their repayment period.

"For those borrowers who have not yet consolidated their loans, the clock is ticking to fix an interest rate based on today's all-time low rates," said Patricia Scherschel, vice president of loan consolidation, Sallie Mae. "Graduates, as well as students who are currently enrolled in school, can take advantage of loan consolidation to achieve maximum monthly payment relief and a fixed interest rate for the life of the loan, but they must act before June 30."

In addition, Sallie Mae offers borrowers who wish to consolidate an even deeper discount of up to 1.25 percentage points. Eligible borrowers with a balance of at least $10,000 will receive a rate discount of 1 percentage point after making their first 36 payments as initially scheduled. These borrowers will continue to receive the reduction as long as they make payments according to that schedule. In addition, borrowers will be eligible to receive an immediate 0.25-percentage-point reduction in the interest rate on their consolidation loan after they sign up to pay via direct debit.

Sallie Mae offers Stafford, PLUS and Consolidation borrowers the ability to apply for a loan, review their rights and responsibilities and submit their "signatures" electronically through Sallie Mae's Web site, http://www.salliemae.com/. For more information, individuals can visit salliemae.com or speak with Sallie Mae's specialists by calling toll free:

  * Stafford Loans: 888-2-SALLIE, Monday - Thursday, 8 a.m. - 11 p.m., and
    Friday, 8 a.m. - 8 p.m. ET

  * PLUS Loans: 800-891-1410, Monday through Friday, 8 a.m. - 11 p.m. ET

  * Loan Consolidation: 800-448-3533, Monday through Thursday, 9 a.m.-
    9 p.m., Friday 9 a.m.- 5 p.m. ET

SLM Corporation , commonly known as Sallie Mae, is the nation's No. 1 paying-for-college company, managing nearly $112 billion in student loans for 8 million borrowers. Sallie Mae was originally created in 1972 as a government-sponsored entity (GSE). In 2004, the company terminated its GSE charter, ending its ties to the federal government. Sallie Mae remains the country's largest originator of federally insured student loans. Through its specialized subsidiaries and divisions, the company also provides debt management services as well as business and technical products to a range of business clients, including colleges, universities and loan guarantors. More information is available at http://www.salliemae.com/. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

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