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Students Rush to Consolidate Before Rates Increase
"We have seen an increase in student loan consolidation activity and we anticipate a rush between now and midnight June 30th," said Mari Mann-Silva, vice-president of Financial Operations of the not-for-profit Council for South Texas Economic Progress (COSTEP). "Loan consolidation incentives along with the July 1, 2006 rate increase are driving the market," Mann-Silva added. "COSTEP offers incentive plans based on loan amounts. The following is a recap of those incentives: Student loan amounts of $12,500 or greater will receive a 1% interest rate reduction at the time of consolidation and an additional 1% interest rate reduction after 36 on time payments; loan amounts that are between $5,000 and $12,499.99 will receive a 1% interest rate reduction after 36 on time payments; all student loans are eligible to receive a .25% incentive for participating with the SUREPAY(SM) program."
"The end result is that many students will be paying thousands of dollars more in interest rates unless they consolidate now," said Patricia Beard, president of COSTEP.
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Federal loan rates face changes
After Saturday, college students at OSU and across the country will no longer be able to secure a federal loan at the current interest rates. Rates on the Stafford and Parent PLUS loans are set to increase by 2 percent, with the rates on Stafford subsidized and unsubsidized loans increasing from a variable of 4.7 percent to a fixed rate of 6.8 percent, and the Parent PLUS loans increasing from a variable rate of 6.1 percent to a fixed 8.25 percent. These loans can be bundled into one consolidation loan and secured at a lower fixed interest rate of 4.7 percent. In order to minimize the number of students repaying loans at higher interest rates, the federal government is allowing students to consolidate their federal loans while they are still in school. Students who are currently enrolled at any accredited institution have the option of applying for a Direct Consolidation Loan from the U.S.