The cost of federal student loans is about to fall for most borrowers from already historic lows, the U.S. Education Department said Wednesday.
On July 1, interest on government-backed student loans will automatically fall to 4.06 percent, from 5.99 percent. Parents borrowing to finance their youngsters' schooling will see their rate drop to 4.86 percent, from 6.79 percent.
The government estimates that if the new rate remained unchanged, student borrowers with a $10,000 balance would save $1,133 over the standard 10-year repayment plan.
Last year's rates were already the lowest since the 7 percent when the student loan program began in 1965.
Loans are made on a variable rate reset each July 1, based on short-term interest rates the government sets after U.S. Treasury bills are auctioned at the end of May. The last auction this month was Tuesday.
The rate drops apply only to Stafford loans for students and to PLUS loans for parents that were disbursed on or after July 1, 1998.
Loans obtained before then could also benefit from the lower rates if consolidated. Those thinking of consolidating should examine their options, said Sally Stroup, assistant secretary for postsecondary education.
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