As of July 1, 2008, the interest rate on subsidized Stafford Loans for undergraduate students is 6.0%. The interest rate on subsidized Stafford Loans for graduate students is 6.8%.

Most loans disbursed before July 1, 2006, have a variable rate. The rates for July 1, 2008, through June 30, 2009, are:

• 4.21% while in repayment
• 3.61% while in-school or grace (grace or deferral)

Interest rates for Stafford and PLUS Loans disbursed before July 1, 2006, are established each July 1 based on the most recent 91-Day Treasury Bill auction in May, plus a margin determined by the U.S. Department of Education (USDE).

A quarterly interest letter is mailed to a borrower to advise of accrued interest. This letter tells how much interest has accrued if the borrower would like to pay accrued interest on a quarterly basis. Unpaid interest during this period will be capitalized (added to the principal).