Variable Interest Rates Changed on July 1

Interest rates on federal student loans that were first disbursed on or after July 1, 1998, but before July 1, 2006, are adjusted annually on July 1, according to a formula set by Congress that is based on the results of the last Treasury Bill (T-Bill) auction in May. On July 1, 2008, the interest rate for federal student loans decreased by 3.01%. If you have non-consolidated loans that were disbursed on or after July 1, 1998, but before July 1, 2006, your interest rate may decrease. The decrease in the variable rate could affect how your payments are applied by increasing the portion of your payment that is applied to the principal balance. Paying more toward the principal balance will help you pay off your loan faster and pay less interest over the life of the loan.

The interest rate may be changing, but your monthly payment will not automatically change. If you choose, you may request to have your minimum monthly payment recalculated based upon the lower interest rate. Please login to your account to first verify that you have non-consolidated loans with variable interest rates.

1. Go to www.edfinancial.com/paynow.
2. Log in with your Username and Password.
3. View each loan that was disbursed on or after July 1, 1998, but before July 1, 2006. The Loan Program should be either Federal Stafford Loan or Federal PLUS Loan. Under the Loan Detail section, the “Interest Rate Type” will be listed as Variable or Fixed.

Recalculating your monthly payment with the lower interest rate may lower your payment, but it may also cost you more money over time. If you decide to keep your current monthly payment with the lower interest rate, you will pay your loan off faster and you will pay less interest, so more of your payment will go toward reducing the principal balance of the loan. If you decide to recalculate your monthly payment to lower it, you will pay less toward the principal balance. It will take longer to pay your loan in full, and you will pay more interest over the life of the loan.

Below is an example of how lowering the monthly payment could affect a loan:

Original Principal Balance: $30,000
Interest Rate: 5.01%
Current Monthly Payment: $251.31
Repayment Term: 165 months
Total Amount Paid: $ 41,570.39

Original Principal Balance: $30,000
Interest Rate: 5.01%
Recalculated Monthly Payment: $198.15
Repayment Term: 240 months
Total Amount Paid: $ 47,556.60

Additional Interest Paid: $5,986.21

This example illustrates that lowering your payment could cost you thousands of additional dollars in interest as a result of the additional time required to pay the loan balance in full. If you have variable rate loans and would like to lower your monthly installment, please email edservicing@edfinancial.com. To view the change in interest rates as they apply to the different loan types, please visit the interest rate section on our website here. If you have other specific questions regarding the repayment terms on your loan, please contact a Customer Service Representative by clicking here and selecting Current Loan Questions as the topic.