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Here's a note from NAGPS regarding student loan interest rates.

Tim Benner, President
United Government of Graduate Students

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NAGPS Legislative Update
Student Loan Interest Rate Change
March 2, 1998

IF YOU ARE INTENDING TO TAKE OUT A STUDENT LOAN AFTER JULY 1, 1998, READ
THIS UPDATE AND ACT ACCORDINGLY TO ENSURE A DECREASE IN YOUR INTEREST
PAYMENTS!

The 1993 Student Loan Reform Act included a provision, scheduled to take
effect on July 1, 1998, that would change the formula for calculation of
interest rates on both direct (FDSLP) and government-guaranteed (FFELP)
student loans. In PLUS and Stafford loans, the 91 day "T-Bill" would be
replaced by the 10-year Treasury Bond + 1%.  The net result of this change is
that your student loan interest rates could drop by as much as 1%!  This
would save student borrowers in excess of $10 billion dollars over the
life of loans made over the next five years.

Some recently published reports have sounded warnings that the new formula
might sharply restrict the ability of lenders to tap the capital markets
to obtain the $20 billion or more they must raise each year to fund new
Stafford and Federal PLUS loans.  As a result, many lenders fear they will
be forced to withdraw from the program. Sallie Mae, one of the largest
lenders, recently founded a PAC and enlisted the services of former House
education subcommittee chair Pat Williams to block the proposed
legislative changes. 

According to an analysis released by the Treasury Department on February
25, "the new formula will provide a rate of return on student loans that
is below the target rate of return of for-profit lenders" in the Federal
Family Education Loan Program (FFELP), the government-guaranteed student
loan program. Responding to this report, the Clinton Administration
released a compromise proposal on February 29 that would reduce interest
rates by 0.8% for all new loans after July 1, leading to current interest
rates of 7.0% while in-school, and 7.6% once repayment starts. There are
a number of other proposals under consideration, as well. 

WHAT YOU CAN DO:

Many Republicans and Democrats in Congress believe that it is possible to
address the banking industry's concerns and safely lower current student loan
interest rates. NAGPS agrees. Unfortunately, in the wake of the aggressive
lobbying effort by industry on this issue, student voices are in danger of
being lost in the fray. 

Call your Member of Congress and express your desire for Congress to work
to lower interest rates while keeping the guaranteed loan program healthy.
It CAN be done! Let them know how current interest rates on YOUR loans are
impacting your career and your future, and how reduced student loan
interest rates will help. Call the House Switchboard at 202-225-3121 or
the Senate Switchboard at 202-224-3121 and ask to speak to the office of
your choice. 

For more details and analysis, please visit
  http://www.nagps.org/NAGPS/lcc-page/updates98/leg-upd-980302.html

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