UHEAA Board Extends Student Loan Borrower Benefits

The Utah Higher Education Assistance Authority (UHEAA) Board of Directors has extended the UHEAA Borrower Benefits program for Stafford, PLUS, and Consolidation loans for new loans originated through June 2006 (regardless of when the loans are purchased by UHEAA’s secondary market). The Board’s action will continue one of the nation’s most borrower-friendly loan programs which, in combination with the availability of historically low interest rates, provides students the opportunity to invest in their education while lowering the future burden of student loan debt.

The extension of the UHEAA borrower benefits program allows borrowers with UHEAA guaranteed loans to continue to take advantage of the following:

Guarantee Fee Benefit - UHEAA will pay the one percent guarantee fee (insurance premium) on behalf of Stafford and PLUS loan borrowers. This allows the student to receive and use that one percent of the loan amount that would otherwise be deducted from the amount disbursed.

Automatic Payment Benefit - For a borrower who agrees to have her loan payments automatically deducted from a checking or savings account, UHEAA will lower the interest rate charged on the loan by 1.25 percentage points.

Origination Fee Credit Benefit - The federal government requires a 3 percent fee be deducted from the amount of each Stafford and PLUS loan. For loans guaranteed by UHEAA after May 1, 2001 and before June 30, 2006, UHEAA will credit the entire amount taken by the federal government to the borrower’s outstanding loan balance. An undergraduate student with a loan amount of $5,000 would receive a $150 credit.

Timely Payment Benefit - For Stafford and PLUS loans that entered repayment status after January 1, 1993, borrowers can qualify for an additional interest rate reduction of 2 percentage points if the first 48 payments are paid on time. The interest rate on the remaining balance will be reduced automatically for the rest of the repayment period, as long as the loan does not default. Borrowers with consolidation loans would qualify to have the interest rate reduced by 1 percent after making the first 48 monthly payments on time and could combine this benefit with the Automatic Payment Benefit to further reduce the interest rate by a total of 2.25 percentage points.

PLUS Loan Interest Benefit - PLUS loans first disbursed between July 1, 1999 and June 30, 2006 and sold to UHEAA’s secondary market within one year of being fully disbursed qualify for the PLUS Loan Interest Benefit. If the first 12 monthly payments are made on time, UHEAA will credit to the loan balance the entire amount of interest charged during the first 12 months of repayment.

Rates on Federal Stafford and PLUS loans are reset every year on July 1 based on formulas that follow the 91-day Treasury bill with a maximum rate of 8.25% for Stafford and 9% on PLUS loans.

Any questions related to this Bulletin should be directed to UHEAA Policy and Training at 801.321.7166 or by e-mail to mjohnson@utahsbr.edu.