Interest rates to dip for some student loans

Starting today, the interest rate on some newly disbursed student loans will begin to fall. But the rate cut, which partially fulfills a pledge made by House Democrats, has more footnotes than a college term paper.

Not all student borrowers will qualify. Those who do will save, at best, around $14 to $19 a month when they begin repaying their loans, according to two estimates.

In the months leading up to the 2006 congressional elections, House Democrats promised to "cut student loan interest rates in half" for federally guaranteed parent and student loans. What they settled for was substantially less.

The rate cut applies only to new subsidized Stafford loans for undergraduates, which go to students with financial need. On a subsidized loan, the government pays interest while the student is in school, so the rate cut will have no impact until the student leaves school and starts repaying the loan.

The interest rate on this particular loan will fall by half - from 6.8 percent to 3.4 percent - in stages over five years. After that, the rate goes back to 6.8 percent.

When the student starts repaying loans, the rate on each loan will depend on when it was taken out. The rate will be:

-- 6 percent on loans disbursed between today and June 30, 2009.

-- 5.6 percent on loans disbursed from July 1, 2009, to June 30, 2010.

-- 4.5 percent on loans disbursed from July 1, 2010, to June 30, 2011.

-- 3.4 percent on loans disbursed from July 1, 2011, to June 30, 2012.

-- 6.8 percent on loans disbursed after July 1, 2012.

Students who start college this fall and qualify for subsidized loans all four years will save the most. Students who are already in college will get smaller benefits because their existing loans will remain at their old rates.