Student loan rates to go up July 1
May 31st, 2006 - Posted in College Loans, Student LoanStudent loan interest rates will rise almost 40 percent when they are reset on July 1, according to the results of the 91-day U.S. Treasury bill auction on Monday.
The U.S. Department of Education will officially announce the change in the near future, according to Nelnet, the education finance company based in Lincoln.
The jump in interest rates comes at a time when student debt financed at even lower rates is pressing hard on recent graduates, according to a new survey.
New rates for consolidation loans made on or after July 1 will rise to 6.625 percent for Stafford loans in grace period or in-school deferment, and to 7.25 percent for Stafford loans consolidated during repayment, Nelnet said.
Currently, consolidation loan interest rates are 4.75 percent for Stafford loans in grace or deferment and 5.375 percent in repayment.
Stafford loans are available from the federal government to graduate and undergraduate students.
The new consolidation rate on Parent Loans for Undergraduate Students loans will rise to 8.0 percent, up from the current 6.125 percent. Called PLUS loans, they are loans from private lenders guaranteed by the student’s parents.
New Stafford and PLUS loans disbursed on or after July 1 will carry a fixed interest rate. The Stafford loan interest rate will be 6.8 percent, while the PLUS rate will become 8.5 percent, Nelnet said.
Nelnet is advising students to consider consolidation before July 1.
“There is one month left for students to consider consolidating at the current lower rates,” Nelnet spokesman Eric Solomon said. “If you act now, you could save more than $5,000 over the life of a $20,000 loan.”
According to a new survey, almost seven out of ten college graduates who responded are paying off student loans or have spouses who are, and the average outstanding balance is greater than $29,000. Almost 40 percent of graduates with college debt expect to take more than 10 years to pay off their loans.
The Internet poll was sponsored by AllianceBernstein Investments Inc. The poll surveyed 1,508 college graduates ages 21 to 35.
Forty-four percent of respondents with college debt have delayed buying a house, 32 percent have been forced to move back in with their parents. More than a quarter have put off a dental or medical procedure because of their financial situation, the survey showed.
Higher interest rates are also weighing on their minds. More than half of those paying off college or graduate school debt believe that interest rates that continue to rise will have a “major impact†on their ability to pay off student debt.
Already, 29 percent regularly or occasionally miss payments, according to the survey.
Source: journalstar.com