Interest Rate FAQ
Please be aware that the Higher Education Reconciliation Act of 2005 (HERA) changed some of the terms of Federal Stafford, PLUS, and Consolidation Loans made under the Federal Family Education Loan Program (FFELP), meaning those program details now differ from information you received when you originally applied for the loan(s).
Read additional information about HERA or click on any of the questions below for the most current explanation of specific changes/questions.
- How does interest accrue on my student loan(s)?
- Why do interest rates change?
- How are rates calculated?
- How will I know if my rate increases?
- If my rate increases, will my payment increase?
- What can I do if my payments increase, and I can't afford them?
- Does this change affect my Interest Rate Reduction/Rebate?
- Does this change affect my Paid Ahead status?
- Does this change affect my Direct Debit service?
- What happens if I have both fixed and variable rates on my loans?
1. How does interest accrue on my student loan(s)?
Visit our page on Interest Accrual.
2. Why do interest rates change?
Federal regulations dictate that loans in the Federal Family Education Loan Program (FFELP) have variable interest rates which change every year on July 1. They use the government's 91-day Treasury Bill (or T-Bill) and use the May T-Bill to set the rate for the entire year.
Most private student loans have variable interest rates that may change monthly or quarterly in accordance with the terms of your promissory note. Some private loans may have fixed interest rates. Please refer to your loan’s promissory note for specifics on how your interest rate is calculated and how often it will change.
View current interest rates for Federal Stafford, SLS or PLUS loans.
3. How are rates calculated?
STAFFORD Loans
While in school, interest accrues at a rate based on that 91-day T-Bill + 1.7%.
Once out of school, interest accrues at a rate based on the same T-Bill + 2.3%.
PLUS Loans
Borrowers pay the rate on that 91-day T-Bill + 3.1%
If you'd like help calculating your interest rate, try our online calculator.
4. How will I know if my rate increases?
AES will send written notification before July 31, 2007. This written notification may be in the form of a letter or a change in the interest rate shown on your monthly billing statement.
You can also access detailed information about your loans via the Online Account Access portion of our Website. If you do not have an online account, please visit our Website to sign up. It’s fast, easy, and FREE!
5. If my rate increases, will my payment increase?
Installment amounts, or monthly payments, for student loans usually only change to ensure that a loan will be paid off within the allotted loan term.
Federal guidelines state that FFELP loans have a loan term of 120 months, or 10 years. If the interest rate increases and calculations show that your current monthly payment does not allow for you to repay your loan(s) within your time frame, your monthly payment may increase.
If calculations prove that you can repay your loan(s) within the allotted term, your monthly payment will not change.
6. What can I do if my payments increase, and I can't afford them?
- Review the options for borrowers who are experiencing financial hardship.
- AES Direct Debit
You may qualify for an interest rate reduction by signing up for the AES Direct Debit Service. Direct Debit allows you the simplicity and convenience of having your monthly student loan payment(s) automatically drafted from your checking or savings account on the same date each month.
7. Does this change affect my Interest Rate Reduction/Rebate?
If you currently have a variable interest rate and your rate is increased on July 1, 2007, you will continue to receive the interest rate reduction. The reduction will be based upon the NEW rate.
The following example is based upon a Variable Rate Federal Stafford loan:
PRIOR TO JULY 1, 2006
| current rate | interest rate reduction | your reduced rate |
| 3.42% | 1% | 2.42% |
AS OF JULY 1, 2006
| current rate | rate increase | new rate | interest rate reduction | your reduced rate |
| 3.42% + | 1.7% = | 5.12% - | 1% = | 4.12% |
8. Does this change affect my Paid Ahead status?
If your account is in a paid ahead status, that means that the payments received on your loan(s) exceed the amount expected, according to your repayment schedule.
If you continue to pay ahead regularly, you should not see a change in your monthly installment or billed amount. If, instead, you use your paid ahead status to skip a payment then you will probably see a change in the amount due when the change in interest accrues to the point where it "catches up" to your payments.
Once the payments and interest catch up to one another, we will re-disclose your loan(s). This means that we will re-compute your repayment schedule to make sure your monthly installment amount will indeed repay your loan(s) within the time you are allotted on your schedule.
Here's an example: If you are paid ahead through October 10, 2007, the first due on your re-disclosure will be November 10, 2007. When we look at the number of payments you have left versus your monthly installment amount due, we will determine if your current installment amount will still repay your loan in the time allowed. If it will pay off your loan, you probably will not see a change in your installment amount. If it will not pay off your loan, your payment amount will change, and the new payment amount would take effect with the November 10, 2007, due date.
(If the paid ahead for October 10, 2007 is a partial payment, you will receive a bill for October 10, 2007, showing the partial amount that remains from this due date at the old installment amount).
Please note: During your paid ahead status, you will receive a bill showing $0.00 due or the partial payment due, depending on how far ahead you have paid.
9. Does this change affect my Direct Debit service?
AES will make every effort to avoid interruption in your Direct Debit Service.
In some cases, when a loan is re-disclosed, a payment increase may occur. Due to the possibility of an increase, some customers may receive a bill indicating that EFT will not be extracted the first month after the re-disclosure. If this occurs, you will need to use our Online Payment Solution, via our Website, or send a check for the first payment on your new schedule. Normal extractions will occur for subsequent bills unless you submit a written request that your Direct Debit Service be discontinued.
10. What happens if I have both fixed and variable rates on my loans?
AES will make every effort to avoid interruption in your Direct Debit Service.
Having both fixed and variable interest rates may affect your monthly installment amount. For example, the monthly installment amount for loans that have a fixed interest rate may remain the same until the loan(s) are paid in full.* However, due to possible interest rate changes every July 1st, this may cause a change to the installment amount on your variable interest rate loan(s). If the interest rate increases, it may raise the monthly installment amount; however, if the interest rate decreases, this may cause the loan(s) to be paid off earlier than anticipated.
*Capitalization of interest may increase the monthly installment amount.
- Loan Repayment Information Brochure (372 KB PDF)
- Direct Debit Application (629 KB PDF)