STUDENT LOAN INTEREST RATES SET TO INCREASE On December 21, 2005, Congress passed legislation that will cut close to $13 billion in funding out of the federal student loan program. In addition, the new legislation changes the interest rates on federal Stafford loans and PLUS loans issued after July 1, 2006. Previously, the interest rate on Stafford loans was 4.7% (variable) and the interest rate on PLUS loans was 6.1% (variable). These interest rates will become a fixed 6.8% and 8.5% respectively after July 1, 2006. As a result, college students and parents who obtain such loans after July 1, 2006 will pay significantly more in interest charges over the repayment life of the loan, sometimes thousands more in added interest charges. Those who already have unpaid student loans and who have not yet consolidated could face a financial disaster when the federal government "resets" student loan interest rates on July 1st as it does every year. The expected jump in monthly student loan payments is predicted to be about 30% because the interest rate the government uses to reset student loan interest rates is the Treasury bill rate, which has risen by about 30% since July of 2005. So, what should you do? If you have already borrowed student loan money you need to consolidate now so that you can lock into the current lower interest rates, which range from 3.5% to 4.75% depending on the types of loans you have. Even if you have not yet completed college, you still might be able to do an "in-school" consolidation to lock in a lower rate on the loans you already have. Those still in college or planning to take out additional student loan money after July 1, 2006 should be as conservative as possible in the amount they borrow. Financial experts predict that for every $10,000 you borrow in student loan money, you will have to pay an additional $1,000 in interest charges as a result of the hikes in interest rates effective July 1, 2006. Monthly payments will be enormous in the future, even if you consolidate since the lower interest rates will not be available to you, so borrow as little money as you can. Remember the deadline to consolidate student loans is June 30, 2006. You need to get your consolidation applications in well before this deadline, so act now. Be aware that if you are graduating this spring, your consolidation application might not be processed until after you graduate, which might make you miss the June 30th deadline. Make sure this doesn't happen to you. A good resource to find out more information about student loan consolidation is Nelnet, one of the largest student loan consolidation companies in the United States. Their website address is http://www.nelnet.com. Related article: Can Student Loan Debt be Discharged in Bankruptcy? |
Debt Kit -- Settle unsecured debts for less than half of amount owed Credit Kit -- Improve credit rating and reduce monthly payments by $200+ |
Debt > Student Loan Debt |
Debt > Student Loan Debt |
Debt Kit -- Settle unsecured debts for less than half of amount owed Credit Kit -- Improve credit rating and reduce monthly payments by $200+ |
STUDENT LOAN INTEREST RATES SET TO INCREASE On December 21, 2005, Congress passed legislation that will cut close to $13 billion in funding out of the federal student loan program. In addition, the new legislation changes the interest rates on federal Stafford loans and PLUS loans issued after July 1, 2006. Previously, the interest rate on Stafford loans was 4.7% (variable) and the interest rate on PLUS loans was 6.1% (variable). These interest rates will become a fixed 6.8% and 8.5% respectively after July 1, 2006. As a result, college students and parents who obtain such loans after July 1, 2006 will pay significantly more in interest charges over the repayment life of the loan, sometimes thousands more in added interest charges. Those who already have unpaid student loans and who have not yet consolidated could face a financial disaster when the federal government "resets" student loan interest rates on July 1st as it does every year. The expected jump in monthly student loan payments is predicted to be about 30% because the interest rate the government uses to reset student loan interest rates is the Treasury bill rate, which has risen by about 30% since July of 2005. So, what should you do? If you have already borrowed student loan money you need to consolidate now so that you can lock into the current lower interest rates, which range from 3.5% to 4.75% depending on the types of loans you have. Even if you have not yet completed college, you still might be able to do an "in-school" consolidation to lock in a lower rate on the loans you already have. Those still in college or planning to take out additional student loan money after July 1, 2006 should be as conservative as possible in the amount they borrow. Financial experts predict that for every $10,000 you borrow in student loan money, you will have to pay an additional $1,000 in interest charges as a result of the hikes in interest rates effective July 1, 2006. Monthly payments will be enormous in the future, even if you consolidate since the lower interest rates will not be available to you, so borrow as little money as you can. Remember the deadline to consolidate student loans is June 30, 2006. You need to get your consolidation applications in well before this deadline, so act now. Be aware that if you are graduating this spring, your consolidation application might not be processed until after you graduate, which might make you miss the June 30th deadline. Make sure this doesn't happen to you. A good resource to find out more information about student loan consolidation is Nelnet, one of the largest student loan consolidation companies in the United States. Their website address is http://www.nelnet.com. Related article: Can Student Loan Debt be Discharged in Bankruptcy? |
