consolidation loan stafford student

Student loan interest rates set to increase

Today is the last day student loan holders will have to consolidate their debt without feeling the hit of the nearly 2-percent increase in interest. The Federal Stafford loan rate will rise 1.93 percent July 1 and parent loans for undergraduate students (PLUS) will rise 2.4 percent, marking the largest jump since 2000. The change stems from a new bill that was incorporated into the Deficit Reduction Act of 2005, S. 1932, according to a press release from the Montana Guaranteed Student Loan Program.Ron Muffick, director of business relations and programs for the MGSLP, said, "Because of the interest rate change effective July 1, I encourage borrowers to contact their lenders to explore all of the options for repayment including consolidation."The average student debt for a Montana borrower is $20,000, quite less than the national level of $50,000, according to the American Council on Education."The rate increases mean higher interest payments for students and graduates over the life of their loan," said Jim Stipcich, president of Student Assistance Foundation.

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Students pressed to consolidate their loans

Student loan interest rates will go up almost 2 percent on July 1, but consolidating now can lock in the current rate.

By consolidating student loans now, the interest rate will turn from a variable rate to a fixed rate, saving students thousands in interest over the life of the loan. Consolidation does stretch out the life of the loan, but decreases the monthly payments.

The interest rate on Federal Stafford Loans is 5.3 percent, according to Staci Schiller of Wells Fargo. The increase will bring it to 7.14 percent.

Loans taken out after July 1 will also be at fixed interest rates, instead of variable rates.

"I need to consolidate," said Beth Arnason, UND student. "I didn't know that it would lock in the lower interest rate. I will definitely look into it."

But when students consolidate their loans, they lose their six-month grace period after finishing school.

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