Englewood Cliffs, NJ (PRWEB) March 13, 2006
At a time when rising tuition costs already weigh heavily on future college graduates and their families, Congress recently passed a Bill raising interest rates on student loans and cutting $13 billion from the federal student loan program. These higher rates promise to have a significant impact on the cost of repaying student loan debt for years to come.
Frank Ballmann, student loan expert and an executive vice president at consolidation leader Educational Direct says, "There's been a lot of media coverage lately of how interest rates on new student loans are rising because of the recent Deficit Reduction Act. This coverage, however, obscures a far more important and actionable event. Interest rates on existing student loans are set to rise by over 1.6% based on the most recent Treasury bill auction. The repayment rate for existing Stafford loans to students would be 6.93% based on that auction, a rate higher than the 6.8% rate for new loans. There is good news, however, because borrowers who already have student loans can lock in their existing interest rate, which could be as low as 4.75%, by consolidating prior to July 1."
The average cost of tuition, room and board has climbed at more than double the rate of inflation over the last eight years. Such hikes have also meant skyrocketing student loan debt, which rose more than 70% from $11,400 in 1997 to more than $20,000 in 2005.
The Bill impacts Stafford loans – popular because they require no credit check or test to qualify, and PLUS loans – available to parents of dependent undergraduate students, regardless of financial need.
Under the new legislation, the interest rate on new Stafford loans will jump to 6.8% from the current rate of 5.3%, while the rate on new PLUS loans will jump to 8.5% from the current rate of 6.1%. Both rates will be fixed.
The good news for recent grads or students who will graduate this spring is that they can still lock in a low fixed rate. But there’s not much time. With rate hikes expected to take effect on July 1st of this year, loans must be consolidated by June 30, 2006.
Ballmann offers the following tips for students and their parents:
--Students with $20,000 in student loan debt would pay an extra $300 in interest next year, based on the recent rise in interest rates, if they don't lock in the current loan consolidation rate.
--The interest rate for consolidation loans can be locked in at a fixed rate for as long as it takes to repay the loan.
--Consolidation saves money and time – lowering monthly payments with a single fixed interest rate and simplifying the loan repayment process with one monthly payment.
--There are no fees or credit checks to consolidate student loans; and it is a right given to borrowers under the federal consolidation loan program, authorized in the Higher Education Act.
About Educational Direct:
Educational Direct's corporate headquarters is located in Englewood Cliffs, New Jersey. The Company’s consolidation loans are serviced by corporate partners who have been designated as Exceptional Performers by the Department of Education. If you would like to speak directly to a qualified Student Loan Specialist at Educational Direct, please call 1-800-895-1911 or visit: https://www.educationaldirect.net/studentloan/index.htm?referID=SCPRWEB.
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