Interim Interest Rates on
Stafford and PLUS Loans



Lenders and Schools
June 10, 1998
Interim Interest Rates on Stafford and PLUS Loans

To assure that your Common Manual remains current, please record this document on your LPM/LPB index, and retain it in Appendix E of your manual.


The Intermodal Surface Transportation Efficiency Act (ISTEA) was signed by President Clinton on June 9, 1998. The law contains an interim student loan interest rate formula, effective for three months, from July 1, 1998 through September 30, 1998, inclusive. This interim formula preempts the rate which was due to become effective on July 1, 1998 based on the July 23, 1992 Higher Education Act. The 90-day student loan interest rate formula provides the following interest rate calculations:

Stafford Loan


in-school, grace, and deferment       -    91-day Treasury bill plus 1.7%

in repayment                                     -     91-day Treasury bill plus 2.3%


in-school, grace, and deferment       -    91-day Treasury bill plus 2.2%

in repayment                                     -     91-day Treasury bill plus 2.8%


(both Students and Lenders)           -    91-day Treasury bill plus 3.1%,                                                                 capped at 9%

LOSFA has ordered new application/promissory notes with generic disclosure language. Lenders’ and schools’ current supplies of LOSFA applications should be destroyed when the new applications are distributed. Customer Services Representatives will deliver new applications, or they will be mailed upon request by calling 1-800-259-5626, extension 1012.

LOSFA’s electronically-generated application/promissory notes have been revised to contain the USDE-approved generic interest rate disclosure language for loans made on or after July 1, 1998. It advises borrowers that the actual interest rate applicable to their loan will be disclosed to them in a separate disclosure statement.

The Notices of Loan Guarantee and Disclosure for loans to be disbursed on or after July 1, 1998 will continue to be incorrect until LOSFA’s programming has been changed to reflect the new interest rates. LOSFA will not be generating corrected Notices of Guarantee for either schools or lenders. However, because lenders have the responsibility to disclose the correct interest rate, LOSFA is providing an addendum to the Notice of Guarantee (see attached) which lenders may use to notify borrowers whose loans were guaranteed before the date the new interest rate is programmed into the system and whose first disbursements are to be made on or after July 1, 1998.


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