Federal student loan interest rates are predicted to make historic jumps as of July 1, 2006, according to StudentLoanConsolidator.com. For new student loans, the recently passed Deficit Reduction Act will increase interest rates from as low as 4.7% currently to 6.8%, while the worst case scenario for students and graduates with existing loans shows a potential increase from as low as 4.7% to as high as 7.55%, an increase of 61%. If graduates don't consolidate their federal student loans immediately, they could find themselves paying thousands of extra dollars in interest.
Federal student loan interest rates are predicted to make historic jumps as of July 1, 2006, according to StudentLoanConsolidator.com. For new student loans, the recently passed Deficit Reduction Act will increase interest rates from as low as 4.7% currently to 6.8%, while the worst case scenario for students and graduates with existing loans shows a potential increase from as low as 4.7% to as high as 7.55%, an increase of 61%. If graduates don't consolidate their federal student loans immediately, they could find themselves paying thousands of extra dollars in interest.
Federal student loan interest rates are set based on the interest rate of the 3 month Treasury bill, or T-Bill. The rate of the 3 month T-Bill at the last auction in May of each calendar year is used as the baseline for setting the rates which take effect on July 1st of each calendar year. In addition, the Deficit Reduction Act legislation will prohibit students who are in school from consolidating their student loans (and thereby preserving today's lower interest rates) after July 1, 2006.
Christopher Penn, chief economist at the Student Loan Network, remarked, "What we are seeing right now is an assumption in the market that there will be increases in the baseline interest rate in the coming months to 5% or higher. What this means for students is that the projected rates for student loans are likely to go up, possibly as high as 7.55% before the rates are finalized at the end of May."
If Mr. Penn's projections are correct, students and graduates could be paying an interest rate anywhere from 6.9% to 7.55%. To prevent these potential rate increases, students and graduates should consolidate their federal student loans as soon as possible. Student loan consolidation offers the ability to lock in fixed rates, make one payment a month, and cut monthly payments by as much as 60%. Parents with federal PLUS loans are also generally eligible for student loan consolidation as well.
Email CustomerService-at-StudentLoanConsolidator.com for more information; to apply for a student loan consolidation, graduates should visit http://www.StudentLoanConsolidator.com as soon as possible or call toll-free (877) 328-1565.
StudentLoanConsolidator.com is a service of the Student Loan Network (http://www.StudentLoanNetwork.com), an education services company offering students options for managing the entire education life cycle, from getting into their college of choice to financing their education and beyond. The Student Loan Network is based in Quincy, Massachusetts.
