Analysts say a student with a $20,500 Stafford loan can save $3,245 by consolidating before July.

Students and parents who’ve borrowed to cover college costs should consider consolidating their loans by June 30 because interest rates rise 2 percentage points July 1.

The reason: The deficit-reduction act Congress and President Bush OK’d this year changed the rules for students’ Stafford loans and parents’ PLUS loans that include higher fixed interest rates for new borrowing.

“Procrastination is just not an option,” says Mark Brenner of College Loan Corp. “It’s time to act now.”

Act by June 30 and the current rules apply, so the Class of 2006, other students still in school and parents can still consolidate loans and lock in interest rates as low as 4.75 percent during the post-graduate grace period.

As of July 1, new Stafford student loans for students in school or post-graduate grace and deferment periods will carry a 6.54 percent interest rate and 7.14 percent interest once they are in repayment. PLUS loans will carry a 7.94 percent rate.

College Loan Corp. says a student with a $20,500 Stafford loan can save $3,245 by consolidating before July 1.

Patricia Scherschel, vice president of loan consolidation for student lender Sallie Mae, says a one-day delay past June 30 in notifying a lender could cause a new grad in the grace period to pay almost 2 full percentage points more: It’s the difference between a $129 monthly payment versus $151 a month, which adds up to almost $5,000 over 20 years’ repayment.

The new federal law’s other changes, effective July 1, include:

Stafford loans: Effective July 1, only borrowers who are out of school can lock in Stafford loan rates.

Before July 1, recent graduates who want to consolidate Stafford loans into a single loan can lock in their interest payments at the current 4.75 percent rate through June 30. Scherschel says you need to tell your lender you will consolidate by then; you needn’t have all the paperwork completed.

PLUS loans: Parent Loans for Undergraduate Students — PLUS loans — let parents borrow to cover costs not covered by other aid sources.

Rates on outstanding variable-rate PLUS loans, also adjusted yearly, will be 6.1 percent through June 30 and can be consolidated at 6.125 percent between now and then.

Outstanding PLUS loans that aren’t consolidated by June 30 will carry a 7.94 percent rateand be adjusted every July 1.

Lenders typically require a minimum balance before they allow consolidation. Sallie Mae’s is $5,000.

Grad students: Effective July 1, graduate students can take out fixed-rate PLUS loans at 8.5 percent.

Source: www.detnews.com

This entry was posted by Taman Siswa on Tuesday, June 6, 2006 at 5:00 pm and is filed under College Loans, Student Loan. Tags: College, College Loan Corp., Congress, federal law, Loans, Mark Brenner, Patricia Scherschel, Sallie Mae, Student, Student Loan, . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.