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msnbc.com

The cost of college keeps going up, but the cost of borrowing to pay for tuition, room and board will hit a record low this year. Based on results of Wednesday’s auction of Treasury bills, interest rates on student loans will fall as low as 2.82 percent on July 1, down from 3.46 percent currently and 7.59 percent as recently as three years ago.

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The rate cuts on federally supported student loans will affect tens of millions of college students and their parents, helping to offset the increasing cost of college tuition, industry executives said. “That is the silver lining,” said Steve Stocks, a financial aid executive at Sallie Mae. “The cost of financing college is less expensive today because of these historically low interest rates.”

The latest annual rate “reset” also offers an excellent opportunity for freshly minted college graduates and some other borrowers to lock in a repayment rate of under 3 percent for up to 30 years, executives said.

College students and their parents borrow more than $40 billion annually through federal loan programs that carry variable interest rates, which are reset every July 1.

Rates are based on the results of the government’s final auction of three-month Treasury bills in May, which occurred Wednesday and resulted in a rate of 1.12 percent.

Students who have taken out Stafford loans, by far the most popular federally supported loan program, will pay 2.82 percent interest this year if they are still in school or in a deferment period. That rises to 3.42 percent for students who are in the repayment period that typically begins six months after graduation. Rates are slightly higher for students who took out their loans prior to July 1, 1998.

For students who have recently graduated with a sizable balance of federal student loans, it makes sense to consider a federal consolidation loan now, said Cary Katz, chief executive officer of College Loan Corp. Consolidation loans make it easier for students to track repayment of multiple loans and allow the borrower to lock in for up to 30 years, he said.

By acting within six months of graduation borrowers can lock in at the current rate of 2.875 percent for up to 30 years, Katz said.

Katz also urged parents of college-age students to consider borrowing through the federally supported Parent Loan for Undergraduate Students or PLUS program, which he called “one of the best-kept secrets out there.” Loans are available to cover the full cost of tuition, room and board — less the value of any financial aid awarded — without regard to household income or family assets.

“Up to 90 percent of the parents out there have not heard of the program,” he said. Yet the loans allow parents to fund a college education without borrowing against a retirement account, taking out a second mortgage or even selling a mutual fund, he said.

The rate on PLUS loans for the upcoming year is 4.22 percent. And parents also may be eligible to lock in a rate through the federal consolidation program, he said.

and both offer extensive information about student loan programs on their Web sites.

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