Federal Student Loan Interest Rates To Rise Nearly Eight Basis Points This Summer

RESTON, Va., May 29 /PRNewswire-FirstCall/ -- Sallie Mae, the nation's leading saving- and paying-for-college company, today announced that interest rates on existing variable-rate student loans will climb eight basis points, or .08 percentage points this summer. While interest rates on new Federal Stafford and PLUS loans are fixed under federal law, students, graduates and parents who have older, variable-rate student loans can take advantage of the lower rate if they apply for student loan consolidation by June 30.

Most federal Stafford and PLUS loans first disbursed before July 1, 2006 charge variable interest rates that are set by federal formula and based on the last auction of 91-day U.S. Treasury bills in May. Interest rates on loans disbursed after that date are fixed at 6.8 percent (Stafford) and 8.5 percent (PLUS).

"Spring 2007 college graduates who still have variable-rate loans may wish to consider applying to consolidate before their six-month, post-graduation grace period comes to an end," said Patricia Scherschel, vice president, Sallie Mae. "By applying in-grace, they can lock in a rate of 6.625 percent, compared to 7.25 percent if they wait until repayment begins this fall. Additionally, time is money for parents who will save an eighth of a percent by consolidating their PLUS loans before July 1 instead of after it."

When a student opts to consolidate his or her student loans, the student loan consolidation lender pays off the student's current federal student loans in full and creates a new loan, with a new interest rate and a longer repayment term. Federal student loan consolidation has a fixed interest rate, based on the weighted average of the interest rates of the student loans being consolidated, rounded up to the nearest 0.125 percent or 8.25 percent, whichever is less.

For existing Federal Stafford and PLUS loans that still carry a variable interest rate, the interest rates as of July 1, 2007 will be:

  -- Stafford Loans (in school, grace and deferment periods): 6.62 percent
  -- Stafford Loans (repayment): 7.22 percent
  -- PLUS Loans: 8.02 percent

In addition to simplifying record-keeping and check-writing chores, student loan consolidation can reduce the monthly payment amount by nearly 50 percent. That is because student loan consolidation stretches the repayment period from the standard 10 years to up to 30 years, depending on the amount of the education debt.

Student and parent customers who consolidate their Stafford, PLUS and other eligible federal student loans using a Sallie Mae Federal Consolidation Loan can also reduce their interest rate by an additional 1.25 percentage points by making scheduled loan payments on time, and by using automatic debit to make payments electronically. Combined, these benefits can provide the average customer with $4,356 in savings on a $20,000 loan.

Customers also can opt to take advantage of Upromise rewards pay back student loans. Upromise is a free service designed to help families save for college. Consumers simply sign up for membership at http://www.upromise.com/ and begin saving when making purchases from any of the thousands of partners participating in the Upromise program. Through Sallie Mae's newest customer benefit, Upromise Loan Link, when Sallie Mae student loan customers join Upromise, they can automatically transfer their Upromise rewards to their Sallie Mae account to help pay down their student loans.

Scherschel cautions students to be savvy when shopping for a student loan consolidation provider. "When considering whether consolidation is the best choice for your personal financial situation, first contact your primary lender for help in determining your options," she said. "Beware of misleading marketing materials and get the facts before you sign on the dotted line. And if you are a currently Direct Loan customer, consider a private lender like Sallie Mae, which offers savings not available in the Direct Lending program."

Sallie Mae offers Stafford, PLUS and Consolidation Loan customers 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 http://www.salliemae.com/ or speak with Sallie Mae's specialists by calling toll free:

  -- Consolidation Loans: 800/448-3533 from 8 a.m. to 11 p.m. EDT Monday-
     Friday and 8 a.m. to 5 p.m. EDT on Saturday.
  -- Stafford Loans: 888/2SALLIE (888/272-5543), Monday through Thursday,
     8 a.m. to 8 p.m., and Friday, 8 a.m. to 5 p.m. all time zones
  -- PLUS Loans: 800/891-1410, Monday through Friday, 8 a.m. to 11 p.m. EDT

News media are invited to visit http://www.salliemae.com/News for additional resources and information. To schedule a media interview, contact Beth Guerard at 703/984-5621.

SLM Corporation (NYSE: SLM) , commonly known as Sallie Mae, is the nation's leading provider of saving- and paying-for-college programs. The company manages $150 billion in education loans and serves nearly 10 million student and parent customers. Through its Upromise affiliates, the company also manages $17 billion in 529 college-savings plans, and over 7.5 million members have joined Upromise to help save for college with rewards on purchases at nearly 70,000 places. Sallie Mae and its subsidiaries offer debt management services as well as business and technical products to a range of business clients, including higher education institutions, student loan guarantors and state and federal agencies. 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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