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Student
Loan Rate Increase coming July 1st - Consolidate your debt to save
on Interest and lower Payments
February 20th, 2006
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Graduation Day |
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The Stafford
loans and Plus loans are set to increase considerably come July
1st. The Stafford loan will increase from 5.3% up to 6.8%. The
Plus loan will increase from 6.1% up to 8.5%. There is an increase
in borrowing limits for undergrads for their first and second year
in school. Graduate students also have an increase in borrowing
limits. It is possible that the reasons that the government had to
increase interest rates are due to the Hurricane Katrina relief
efforts and also an effort to lower the federal deficit.
Stafford loans are for those that have the most financial need. The
Plus loans are made available for all parents regardless of
financial need for the undergraduate student. Graduate students
also can qualify for a Plus loan. Plus loans have interest from the
time the loan is made, payments start as soon as the last
disbursement for funds is finished. It is important for the
soon to be graduate to check to see if the interest rate changes
will affect their loan.
If you
consolidate your loans by June 30th, it is very likely you can lock
in a lower interest rate with a standard loan. The Federal
Consolidation Loan Program lets any borrower with a federally
insured student loan to consolidate loans into a single monthly
payment. The good news about consolidating is that you not only can
lower the interest rates, but you can extend the length from 10
years to 30 years which will lower the monthly payment greatly.
By consolidating
student loans you can lower your monthly payments by 50% or even
more. Many loans offer a discount of a quarter point of the
interest rate if you automatically deduct the payment from your bank
account. So you need to shop around for the best rate and ask for
any further discounts.
You should also check to see if you have a
fixed rate loan or a variable interest loan. If you have a fixed rate
loan and the payments are acceptable you should stay with your student loans
that you have. The fixed rate student loans will not see the interest
rate increase that the variable rate loans will see in July. New loans
will be affected for the rate increase in July so if you are completing your
schooling soon you need to check into the rates.
By
Nicole Wilson
Best Syndication Staff Writer
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