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 todayÂs 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.
ÂBased on the current T-bill rates, students who wait to consolidate after July 1 will be facing increased rates of almost 5%Â according to Mary Montiel of Collegiate Funding in San Diego CA. ÂStudents 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 paymentÂ
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. ÂOur 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 Â¼% reduction for automatic withdrawalÂ 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 todayÂs 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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