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Era of low-interest rate college loans coming to an end
College students with multiple government-backed loans may want to consider consolidating them before interest rates go up July 1, says Indiana State Universitys director of student financial aid.I think theres a good potential for savings right now, said Tom Ratliff, ISU financial aid director.Current interest rates are very attractive, he said.Students will have to act fast, however.An era of low interest rates on federally-backed college loans is coming to an end. A combination of rising interest rates and legislative changes to the student loan program are affecting repayments. Rates on existing Stafford loans government-guaranteed student loans change annually and are tied to 91-day Treasury bills.On July 1, interest rates will increase from 5.3 percent to 7.14 percent for repayment of Stafford loans, which are variable rates.For PLUS (parent) loans, interest rates on existing variable rate loans will jump from 6.1 percent to 7.94 percent.There is a very substantial savings for parents, who consolidate, Ratliff said.Consolidation is an option for students who have multiple loans and at least $7,500 in outstanding debt, Ratliff said.
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Students scramble to secure lower interest rates on loans
Workers at Student Loan Finance Corp. in Aberdeen are breathing a sigh of relief this month after an unusually busy June.
That's because interest rates on student loans rose by 1.84 percent nationwide on Saturday. Borrowers had through Friday to request consolidation of such loans. For some debtors, consolidation was attractive; for example, doing so could mean lower monthly payments but over more time.
"We had a huge surge of activity," said Dave Zahn, a manager at Student Loan Finance Corp.
To illustrate, on June 1, the business handled 195 phone calls requesting consolidation. On June 30, the same type of calls numbered 1,589.
The federal government didn't announce the new rates until late May, which explains why calls poured in during June, Zahn said.