Student Loan Consolidation  

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Student Loan Rate Increase coming July 1st - Consolidate your debt to save on Interest and lower Payments

February 20th, 2006

Student Loan Rate Increase coming July 1st - Consolidate your debt to save on Interest and lower Payments

Graduation Day

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.

 
 
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By Nicole Wilson
Best Syndication Staff Writer

 

 

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Copyright 2005 Best Syndication                                            Last Updated Saturday, July 10, 2010 09:47 PM