Interest and Interest Rate
"Interest and Interest Rate" submitted by SchoolGrantsfor Editorial Team and last updated on Friday 22nd July 2011
A fee you are charged for use of a lender's money. The amount of interest charged is a percentage of the outstanding principal.
Interest (on loans)
A charge for the use of money. Interest is calculated as a percentage rate of the loan principal. The interest rate can be fixed, which means it does not change over the life of the loan, or the rate can be variable, in which case it changes periodically. The percentage rate may be tied to one of several indexes such as the Prime Rate, LIBOR, or U.S. Treasury Bills.
Interest (on savings or investments)
Profit on an investment. Sometimes called earnings, return or growth.
A government sponsored tax benefit for borrowers in repayment on their federal student loans. A borrower may be able to claim a tax deduction on the amount of interest he/she has paid during the year. More details about: Student Loan Interest Deduction
The interest rate for new subsidized and unsubsidized Stafford loans first disbursed on or after July 1, 2006, is a fixed 6.80%, with these exceptions:
- subsidized Stafford loans first disbursed between July 1, 2009 and June 30, 2010 have an interest rate of 5.6%
- subsidized Stafford loans disbursed between July 1, 2010 and June 30, 2011 have an interest rate of 4.5%
- the interest rate for subsidized Stafford loans will be further reduced in coming years until July 1, 2012 when the rate will return to 6.80%
- PLUS loans first disbursed on or after July 1, 2006 have a fixed interest rate of 7.9% for Direct Loans
Stafford and PLUS loans first disbursed between July 1, 1998 and June 30, 2006 have variable interest rates. The following rates apply to these loans during the period of July 1, 2010 through June 30, 2011:
- subsidized and unsubsidized Stafford loans have an interest rate of 2.47% for loans in repayment and 1.87% during in-school, grace, and deferment periods
- PLUS loans have an interest rate of 3.27%
If you’re unsure of the interest rate(s) on your student loan(s), visit NSLDS to view your loan information.
- Student Loan Interest Deduction
- Federal Tax Benefits Overview
- Gross Income, Adjusted Gross Income (AGI) and Modified Adjusted Gross Income (MAGI)
- A Special Note On Interest Deductibility
- Tax Incentives for Education
- Loan Repayment Incentives
- Federal Taxation of financial aid for students
- Lifetime Learning Tax Credit
- 529 College Savings Plans or Qualified Tuition Programs (QTP)