The Cost of Borrowing
When you take out a loan, you're charged an interest rate—a percentage of the total amount of money you borrowed. You get the money you need now, then pay it back "with interest" according to the loan terms. Then, you're done.
Here's a look at some common loans and their interest rates (as of July 1st, 2006):
| Perkins Loan |
5 percent |
| Subsidized Stafford |
6.8 percent (fixed rate) |
Unsubsidized
Stafford |
6.8 percent (fixed rate) |
| PLUS, Graduate Borrower PLUS |
8.5 percent (fixed rate) |
| Private |
Credit-based (Prime Rate plus 2-7 percent) |
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