Monthly archive June, 2005
Potential changes in the federal government’s student loan consolidation rules may make it an advantage to consolidate student loans. From CNN Money: You also might consider consolidating soon because lawmakers may change the rules governing federal student loans. Two of those potential changes would make loan consolidation less advantageous for borrowers. President Bush has proposed eliminating the fixed interest rate in consolidation, and replacing it with a variable rate. That would mean your rates would change every year, although they couldn’t exceed 6.8 percent. A variable rate loan policy will have even more effect on first or second year college students with fewer student loans, and students who have not yet entered college yet. Furture college students faced with a variable rate loan would be at the mercy of the current rate. They would not be able to lock in low rates with consolidation, as students are able to now. While this is just a proposal, and nothing has passed yet, it would still be wise for parents and students to look at consolidating student loans.
It is now official. Interest rates on student loans are set to rise on July 1st. There’s been an increase across the board, including federal student loan rates and PLUS (parent) loan rates. Students who are in school, in the grace period or in deferment will see a rise in federal Stafford loan rate from 2.77% to 4.7%. A rate of 5.3% will go into effect for borrowers repaying Stafford loans issued since July 1998. Even Federal PLUS loans for parents will increase, with the new rate set at 6.1%. Consolidating student loans before rates go up on July 1st, may be the best option for many students and parents. Borrowers could save thousands by consolidating now.