The Stafford loans allow students to pay for college using funds both from the federal government and from lending institutions like commercial banks.
Officials estimate that the loan rates, which are about 5.39 percent, will drop to about 4 percent this summer. The interest rates are set July 1 each year for the upcoming school year.
The U.S. Department of Education determines the interest rate by adding the treasury bill rate at that time to a standard 2.3 percent.
The interest rates for the 2001-02 school year were set at 5.39 percent.
The year before, the rates were 6.32 percent.
The Stafford loan program is made up of two types of loans, subsidized and unsubsidized.
Subsidized loans are based on need. The federal government pays the students' interest rates while they are in school and gives them a grace period after graduation to pay back the loan.
Unsubsidized loans are given to students who do not meet the need requirements, and the students are responsible for paying the interest rates.
Steven Brooks, director of the N.C. Educational Assistance Authority, estimated that the rates would drop to about 4 percent for the 2002-03 school year.
"I am happy to say there will be a lower rate than usual," Brooks said.
But Brooks said that because the rates were already low, the decrease will have a small impact on the payments.
"It won't affect the number of loans," Brooks said.
"The students that have them just won't pay as much interest."
Brooks added that in a few years the student loans will go to a fixed rate.
"My understanding is that student groups lobbied for a fixed rate to avoid the volatility of annual rate fluctuations under the variable structure," Brooks said. "Up until then, clearly, the lower the rate, the better."
Shirley Ort, director of the Office of Scholarships and Student Aid at UNC, said the rate drop will enhance UNC students' abilities to pay back their loans.
"Loans will be easier to pay back because the terms are better," Ort said. "But it probably won't cause people to get more loans."
Ort said the lower rates will especially benefit graduate and professional students. "They don't get as many grants as undergraduates," she said. "Typically, the graduate and professional schools have to borrow for a larger share of their educational funding."
Ort noted that there is a significant amount of students at UNC using Stafford loans.
In the 2000-01 school year there were 5,847 UNC students borrowing $30.2 million in subsidized loans and 5,126 students borrowing $32.1 million in unsubsidized loans.
Since 1997, the average cumulative debt for graduating seniors has dropped, Ort said.
"The University has put more grant money in to help students because of the rising tuition," Ort said. "Less students have had to borrow."
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