Special Allowance Rates

The U.S. Department of Education (ED) releases special allowance rates on a quarterly basis.  These rates are computed pursuant to Section 438(b)(2) of the Higher Education Act of 1965, as amended.  Enclosed are the special allowance rates for the quarter ending June 30, 1998.

The following table lists the bond equivalent rates of the ninety-one day Treasury bills auctioned during the quarter.
 
 

In the following tables, the information is presented in categories.  These categories are listed below along with a full explanation of the loans contained within each category, and the formula used to determine the special allowance rate for that category.  "Tax-exempt" loans refer to loans made or purchased with (a) funds obtained by the holder from the issuance, or refinancing, of obligations originally issued prior to 10/1/93, or (b) funds derived from default reimbursements, collections, interest, or other income resulting from loans made or purchased with such tax-exempt funds.
 

I.A.    Stafford (subsidized and unsubsidized) loans made prior to 10/01/81

PLUS (fixed-rate; includes student-borrower component of the PLUS Program) loans made prior to 10/01/81

Consolidation loans made prior to 10/01/81

The annual special allowance rate for this category equals the applicable bond equivalent rate  (5.13%) plus 3.5%, less the applicable interest rate, rounded up to the nearest 1/8th of  1%.

I.B.    Tax-exempt loans, otherwise eligible for special allowance, made on or after 10/01/80, but  prior to 10/01/81

The annual special allowance rate for this category equals the applicable bond equivalent rate (5.13%) plus 3.5%, less the applicable interest rate, rounded up to the nearest 1/8th of 1%, divided by two. However, the annual special allowance rate may not be less than 2.5% for 7% loans or 0.5% for 9% loans.

II.A.   Stafford (subsidized only) loans:

made on or after 10/01/81, but prior to 10/17/86

made on or after 10/17/86, but prior to 11/16/86, for periods of enrollment beginning prior to 11/16/86

PLUS (fixed rate; includes student-borrower component of the PLUS Program) loans:

made on or after 10/01/81, but prior to 10/17/86

made on or after 10/17/86, but prior to 11/16/86, for periods of enrollment beginning  prior to 11/16/86

Consolidation loans made on or after  to 10/01/81, but prior to 11/16/86

The annual special allowance rate for this category equals the applicable bond equivalent rate (5.13%) plus 3.5%, less the applicable interest rate.

II.B.   Tax-exempt loans, otherwise eligible for special allowance, made on or after 10/01/81.

The annual special allowance rate for this category equals the applicable bond equivalent rate (5.13%) plus 3.5%, less the applicable interest rate, divided by two.   However, the annual special allowance rate for (a) loans made prior to 10/01/92 may not be less than 2.5% for 7% loans, 1.5% for 8% loans, or  0.5% for 9% loans; and (b) loans made on or after 10/01/92 may not be less than 9.5% less the applicable interest rate.

III.A.  Stafford loans:

(subsidized)made on or after 10/07/86, but prior to 11/16/86, for periods of enrollment beginning on or after 11/16/86

(subsidized) made on or after 11/16/86, but prior to 10/01/92

(unsubsidized, made pursuant to §428H of the Act) made prior to 10/1/92 for periods of enrollment beginning on or after 10/1/92

PLUS /SLS loans:

(fixed-rate) made on or after 10/17/86, but prior to 11/16/86, for periods of enrollment beginning on or after 11/16/86

(fixed-rate) made on or after 11/16/86, but prior to 7/07/87

(variable-rate) made on or after 7/01/87, but prior to 10/01/92, only if the variable rate for each July 1-June 30 period reaches the statutory maximum of 12%

Consolidation loans:

made on or after 11/16/86, but prior to 10/01/92

The special allowance rate for this category equals the applicable bond equivalent rate (5.13%) plus 3.25%, less the applicable interest rate.

IV.     Stafford loans:

(subsidized)made on or after 10/01/92, but prior to 7/01/95

(unsubsidized made pursuant to §428H of the Act) made on or after 10/01/92, but prior to 7/01/95, for periods of enrollment beginning on or after 10/01/92

(subsidized and unsubsidized) made on or after 7/01/95, except during the in-school, grace, and deferment periods

 

PLUS /SLS loans:

(variable-rate) made on or after 10/01/92, but prior to 7/01/94, only if the variable rate for each July 1-June 30 period reaches the statutory maximum of 11% (SLS) or 10% (PLUS)

PLUS loans:

(variable rate) made on or after 7/1/94 and before 7/1/98

Consolidation loans:

made on or after 10/01/92

The special allowance rate for this category equals the applicable bond equivalent rate (5.13%) plus 3.1%, less the applicable interest rate.

V.      Stafford loans:

(subsidized and unsubsidized) made on or after 7/01/95, only during the in-school, grace, and deferment periods

The special allowance rate for this category equals the applicable bond equivalent rate (5.13) plus 2.5%, less the applicable interest rate.

 
Any questions related to this UHEAA Bulletin should be directed to the Policy and Training Department at (801) 321-7166.  If you have any further questions or need additional information on special allowance rates, please contact Brad Ewell at (801) 321-7253.