Code JDMBA2b: Important News For Those With Federal Student Loans

Tuesday, May 31, 2005

Important News For Those With Federal Student Loans

I have already sent in my consolidation paperwork. My readers have until the end of June to do the same before Federal Stafford loan rate rise by 1.93%. From CNN:
http://tinyurl.com/9qufq

"Come July, the rock-bottom rates on your federally guaranteed, variable-rate student loans will be going up. The Federal Stafford loan rate will rise 1.93 percentage points to 5.3 percent, while the Federal PLUS loans for parents will also rise 1.93 percentage points to 6.1 percent."

"When you consolidate in a low-rate environment, you roll all your loans into one and lock in a single rate on the money you owe. That rate is a weighted average of all your loans rounded up to the nearest eighth of a percentage point."

"Right now, if all your loans are Stafford loans obtained after June 1998, the consolidated rate is 2.88 percent if you're still in school and 3.38 percent if you've graduated and have started repaying them. Come July 1, however, those rates will jump to 4.75 percent and 5.38 percent, respectively."

If you decide to consolidate: "If all your loans are with one lender, you have to consolidate with that lender. Bush has proposed eliminating the single-holder rule, but for now it's still in place."

"If you have loans with more than one lender, ask your school's financial aid office which lenders offer the best consolidation deals in terms of discounts and customer service."

THIS PARAGRAPH IS VERY IMPORTANT TO THOSE OF YOU WHO ARE CURRENTLY IN SCHOOL. YOU CAN CONSOLIDATE ALSO:

"Department of Education recently indicated that if you're a current student you may choose to consolidate your loans before graduation. To do so, you would need to request early repayment status from your lender and ask for an in-school deferment. One potential drawback to consolidating while in school is that you would need to begin repaying your loan as soon as you graduate, forfeiting the 6-month grace period."

The main points here are:
  • Consolidation needs to be done by the end of June to take advantage of the current rates
  • If all of your loans are with one lender you must try to consolidate with that lender first
  • If you include your Perkins loans in your consolidation you may lose certain loan forgiveness provisions
  • Current students can now consolidate under a new Department of Education rule! However you will lose your 6 month grace period
  • Many of my readers could save thousands of dollars by consolidating now (depending on your balance and repayment period)!
  • I am not making any legal advice here. Please contact your lender and do your own due diligence before consolidating

My advertiser links will lead you to more information on loan consolidation. I am not recommending any specific loan consolidation company. Please do your own research before consolidating.

A few more informative sources on the issue can be found here:

law.georgetown.edu/finaid/loanconsolidation

loanconsolidation.ed.gov/borrower/brights.shtml

6 Comments:

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