Module Number 2 Interest Rates Payment Application and

Module Number 2 Interest Rates, Payment Application, and Capitalization Paul S. Garrard Founder and President, PGPresents, LLC Independent Student Loan Consulting Spring 2021 PGPresents, LLC - All Rights Reserved

Interest rates* • Federal Direct Loans – Fixed interest rates – Rates change on new loans each July 1 – Direct PLUS always 1% higher than Unsub • Campus-based loans – Usually fixed, often at 5%, check terms • Private loans – Fixed or variable, check terms * Details on interest rates should be in disclosure statement provided by lender

Federal interest rates* Year Unsub Grad PLUS 2020. 2021 2019. 2020 2018. 2019 2017. 2018 2016. 2017 4. 30% 6. 08% 6. 59% 6. 00% 5. 31% 5. 30% 7. 08% 7. 59% 7. 00% 6. 31% * 0% on Direct Loans during period covered by the CARES Act * Maximum rates 9. 5% and 10. 5% on Direct Unsub and Direct PLUS respectively

Payment application • One payment applied proportionately against all loans* • Target voluntary or additional payments on highest interest rate loan, or pick off smaller balance loans • No penalty for early repayment • Payments applied to interest first * Called combined or single billing

Capitalization • Accrued and unpaid interest added to principal • Less frequent the better • Expect interest to capitalize – – At start of repayment When you’re late renewing income plans When switching income plans When there are gaps in status* * For example, when you are late renewing forbearance