Student Loan Rates to Increase 35% July 1 - Consolidating Now May Save Students Thousands of Dollars
On July 1, 2005, Federal Student loans rates will increase by 35-40%. 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. Rates are expected to increase by 1 1/2 % or more. 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.
San Diego, CA (PRWEB) March 12, 2005 -- On July 1, 2005, Federal Student
loans rates will increase by 35-40%. 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%.
Students who consolidate loans while in their grace period and
prior to July 1, may receive a fixed rate as low as 2.875%. For those students
who are already in repayment, they may receive a fixed rate as low as 3.37%.
Rates are variable until consolidated and have a 8.25% cap.
“Based on the
current T-bill rates, students who wait to consolidate after July 1 will be
facing increased rates of almost 5%” 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. Many times students wait until their
6-month grace period is up, but this year that would be a risk due to the
potential rate increase. Students may also put their consolidated loan into
deferment if they are unemployed and unable to make the payment”
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% but could increase to
5.75% or higher.
Some lenders also offer incentives that further reduce
the fixed rate. “Our student and parent borrowers are given an additional 1%
rate reduction after they make 36 payments on time. We also give them a 30-day
grace period to ensure that they qualify along with a ¼% reduction for automatic
withdrawal” states Mary Montiel of collegiatefunding.com. Montiel cautions that
you 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 reauthorization 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 3 or 4 weeks which means that students
and parents should act quickly to take advantage of the current rates.
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Source : http://www.prweb.com/releases/2005/3/prweb217218.htm