student loan debt consolidation
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Students Rush to Refinance as Deadline Approaches
With the cost of consolidating student loans set to spike on July 1, college students and recent graduates are rushing to refinance their debt, and consolidation companies are scrambling for their business.
In recent weeks, lenders have bombarded borrowers with letters and e-mail messages exhorting them to lock in current interest rates before they rise by nearly two percentage points, to 7.14 percent. At least one lender is sending students checks worth hundreds of dollars that they can cash when they make their first payment on a consolidation loan.
But the lenders' aggressive and sometimes misleading sales pitches make many financial-aid advisers uneasy. They say they have been inundated with calls from worried students who have received offers that are disguised as overdue bills or official government correspondence.
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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.