2008 Woodie Awards
Student loan rates to rise over summer
Collegiate Presswire
Issue date: 3/17/05 Section: News
- Page 1 of 1
On July 1, federal student loans rates will increase by 35-40 percent.
Students who have graduated or are about to graduate need to act now to consolidate their loans to lock in the current interest rates, which are the lowest in over 38 years.
Students with a debt of $20,000 could pay as much as $4,500 more over the life of their loans in a 20-year period.
The rates are based on the 91-day T-bill auction that occurs each May.
Based on today's current T-bill auction, rates may jump as much as 1.5 percent.
Students who consolidate loans while in their grace period and prior to July 1 may receive a fixed rate as low as 2.875 percent.
Students who are already in repayment may receive a fixed rate as low as 3.37 percent.
Rates are variable until consolidated and have a 8.25 percent cap.
"Based on the current T-bill rates, students who wait to consolidate after July 1 will be facing increased rates of almost 5 percent," according to Mary Montiel of Collegiate Funding in San Diego CA.
"Students need to realize that they must act quickly this year and consolidate immediately," she said.
"Many times students wait until their six-month grace period is up, but this year that would be a risk due to the potential rate increase."
Graduates who have trouble finding jobs right away do have a safety net.
"Students may also put their consolidated loan into deferment if they are unemployed and unable to make the payment," according to Montiel.
Parents who have used the Federal PLUS program, the parent loan for undergraduate students, are facing the same increases.
Such student loans are variable and adjust every July 1. The rate is fixed based on the weighted average of the loans once consolidated.
Current Plus rates are 4.17 percent but could increase to 5.75 percent or higher.
Some lenders also offer incentives that further reduce the fixed rate.
"Our student and parent borrowers are given an additional 1 percent rate reduction after they make 36 payments on time," said Montiel, whose company can be found online at www.collegiatefunding.com.
"We also give them a 30-day grace period to ensure that they qualify along with a one-fourth percent reduction for automatic withdrawal," she said.
Montiel cautions students need to read the fine print because lenders often have disclosures stating they may revoke this incentive at any time.
The federal student loan program will go through re-authorization this year and the possibility of the fixed rate going away once and for all is a major concern for today's students.
President Bush has recommended this reauthorization in his budget cuts for the fiscal year.
Consolidation can take up to three to four weeks, which means that students and parents should act quickly to take advantage of the current rates.
Students who have graduated or are about to graduate need to act now to consolidate their loans to lock in the current interest rates, which are the lowest in over 38 years.
Students with a debt of $20,000 could pay as much as $4,500 more over the life of their loans in a 20-year period.
The rates are based on the 91-day T-bill auction that occurs each May.
Based on today's current T-bill auction, rates may jump as much as 1.5 percent.
Students who consolidate loans while in their grace period and prior to July 1 may receive a fixed rate as low as 2.875 percent.
Students who are already in repayment may receive a fixed rate as low as 3.37 percent.
Rates are variable until consolidated and have a 8.25 percent cap.
"Based on the current T-bill rates, students who wait to consolidate after July 1 will be facing increased rates of almost 5 percent," according to Mary Montiel of Collegiate Funding in San Diego CA.
"Students need to realize that they must act quickly this year and consolidate immediately," she said.
"Many times students wait until their six-month grace period is up, but this year that would be a risk due to the potential rate increase."
Graduates who have trouble finding jobs right away do have a safety net.
"Students may also put their consolidated loan into deferment if they are unemployed and unable to make the payment," according to Montiel.
Parents who have used the Federal PLUS program, the parent loan for undergraduate students, are facing the same increases.
Such student loans are variable and adjust every July 1. The rate is fixed based on the weighted average of the loans once consolidated.
Current Plus rates are 4.17 percent but could increase to 5.75 percent or higher.
Some lenders also offer incentives that further reduce the fixed rate.
"Our student and parent borrowers are given an additional 1 percent rate reduction after they make 36 payments on time," said Montiel, whose company can be found online at www.collegiatefunding.com.
"We also give them a 30-day grace period to ensure that they qualify along with a one-fourth percent reduction for automatic withdrawal," she said.
Montiel cautions students need to read the fine print because lenders often have disclosures stating they may revoke this incentive at any time.
The federal student loan program will go through re-authorization this year and the possibility of the fixed rate going away once and for all is a major concern for today's students.
President Bush has recommended this reauthorization in his budget cuts for the fiscal year.
Consolidation can take up to three to four weeks, which means that students and parents should act quickly to take advantage of the current rates.
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