The second largest interest rate hike in the history of the student loan program is only weeks away and local students will be among the millions affected, but it’s not too late to lock in lower rates.

Federal student loan interest rates will increase almost 40 percent for students and 30 percent for parents July 1, meaning the new fixed rates for new Stafford loans will be 6.8 percent and 8.5 percent for PLUS (Parent Loan for Undergraduate Student) loans.

New rates for consolidation after July 1 will rise to 6.625 percent for consolidated loans made up of Stafford loans in grace or in-school deferment and 7.25 percent for Stafford loans consolidated during repayment. Currently, those rates are 4.75 percent and 5.375 percent.

The new consolidation rate on PLUS loans will rise from 6.125 percent to 8 percent.

The rates, which are determined each May by an auction of 91-day Treasury bills, means students with $20,000 in debt could pay as much as $4,900 more over the life of their loans.

“Based on the current T-bill rates, students who wait to consolidate until they are in repayment and after July 1 will be facing increased rates over 7 percent,” said Mary Montiel of the Collegiate Funding loan consolidation program, based in San Diego, Calif. “Many times students wait until their six-month grace period is up but this year that will be a costly mistake.”

Despite the increase in mailings and advertisements from loan consolidation companies as the July 1 deadline looms, many current students and recent graduates said they weren’t aware of the increase.

“I’ve heard that they have a tendency to change but I didn’t know about this specifically,” said Joseph Mader, 22, of Parkersburg, who graduated from Marietta College in May. “I haven’t done anything about it.”

Mader had no loans while earning his undergraduate degree in computer science but will face about $10,000 in loans after earning his MBA at West Virginia University.

He chose WVU partially because it would require him to have fewer loans.

“Being an in-state student made it a lot more affordable,” he said. “That was a big consideration.”

And most undergraduate students aren’t as lucky as Mader.

Sixty-five percent of the students who graduated in the 2003-2004 school year had student loans, according to the U.S. Department of Education.

The Associated Press reports that two of three undergraduate students are going into debt after college, owing an average of $19,202.

“I have no debt so far but I have loans for graduate school,” said Tabitha Taylor, of New Matamoras, a recent Marietta College graduate. “It’s just something you’ve got to do.”

Government lending to undergraduate students was a $56.8 billion industry in 2004 and $10.6 billion more was borrowed by students from private lenders.

Of the $19,202 in average college graduate debt, $17,022 comes from federal loan programs.

Interest rates on the loans were raised last year for the first time in five years.

Source: www.mariettatimes.com

This entry was posted by Taman Siswa on Tuesday, June 13, 2006 at 5:58 pm and is filed under Student Loan. Tags: Associated Press, College, Education News, Joseph Mader, Loans, Marietta College, Mary Montiel, San Diego, Student, Student Loan, Tabitha Taylor, U.S. Department of Education, West Virginia University, . 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.