Deadline Looms to Consolidate Student Loans At Today's Low Rates
Now is the time for those with unconsolidated student loans to act. Every July 1st, the government adjusts the interest rates on federal student loans, except those with fixed rates. Effective July 1, 2006, the interest rate hikes are projected to be quite significant.
(PRWEB) May 1, 2006 -- "Now is the time for people with unconsolidated student loans to act. This year, procrastinating can turn out to be quite costly," says Andrew Schwartz CPA, founder of the MDTAXES Network, an affiliation of CPAs throughout the country that specializes in tax planning and preparation for healthcare professionals.
What happens to those who wait? Every July 1st, the government adjusts the interest rates charged on a variety of federal student loans, except those with fixed rates. Effective July 1, 2006, the interest rate hikes are projected to be quite significant, as follows:
- Stafford loans in grace: 6.7% (up from 4.70%)
- Stafford loans in repayment: 7.3% (up from 5.30%)
| | - PLUS loans: 8.10% (up from 6.10%)
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“The interest rate for each type of loan is expected to jump by two full points. As a percentage of the current rates, the interest rate for a PLUS loan increases by almost 33% from the current levels, while the rate on Stafford loans in their grace period jumps by more than 40%,” explains Joe Cronin of EdvisorsNetwork.com, a full service education marketing, service provider and consulting company offering information, advice and services to students worldwide.
Consider Consolidating
Anyone with outstanding federal student loans should consider consolidating them now, which could save thousands of dollars over the life of the loan.
Here is an example. Someone who borrowed $100,000 in student loans is probably paying approximately $1,075 per month in loan payments. As of July 1, based on the higher interest rates, that payment is expected to increase to $1,177 per month. By consolidating their student loans before July 1st, individuals lock in today's low rates, protect themselves against future rate increases, and could cut their monthly payment to as low as $560.
Borrowers will also have an easier time managing their student loan portfolio since they will have fewer loans to monitor and fewer payments to make each month. Plenty of great information about consolidating is available at www.StudentLoanConsolidator.com.
What’s the Downside?
Students and graduates who are nearly finished paying off their loans might not benefit from consolidation and would be better served by simply paying off their loans on schedule. Also, by locking in today's interest rates, borrowers won’t be able to re-consolidate if rates decrease in the future. Nonetheless, for the vast majority of students and graduates with student loans, consolidation remains a prudent choice for managing their student loan portfolio.
Don't Delay
"Consolidation can take up to 90 days to complete. And unlike the April 15th deadline to file tax returns with the IRS, there are no extensions and no second chances available," explains Cronin. "The rates available today will be gone the moment the clock strikes midnight on July 1st. If loan consolidation isn't completed by July 1, borrowers miss out on the opportunity to lock in today's low rates. "
Andrew D. Schwartz, CPA is the editor and a major contributor to www.MDTAXES.com, a website that provides income tax and financial planning information geared towards healthcare professionals. Schwartz has provided financial planning advice in interviews with various media, including the Washington Post and Wall Street Journal. He is available for interviews.
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