Typically, this is the time of year to talk about the last-minute rush to consolidate student loans. But the message now is: not so fast.
The rates aren't going up much this summer. The rules on student loans have changed since a year ago. And consolidating student loans isn't a no-brainer anymore.
So college graduates have a few more months to dig through their numbers and see whether they'll save money.
Rising rates
On Tuesday, we learned that students who are already repaying on variable-rate Stafford Loans will see the rate on their loans go up on July 1 to 7.22% from 7.14%.
Students who are in college or in their grace period will see their rates go to 6.62% -- from 6.54%.
And parents will see the PLUS Loan rate go to 8.02% from 7.94%.
The variable rates are based on the last auction of 91-day U.S. Treasury bills in May.
"This is one of those unusual years where we're not seeing a drastic increase or decrease in rates," said Rob LaBreche, president of consumer marketing for the College Loan Corp.
Mark Kantrowitz, publisher of FinAid.org, a Web site that provides information about student aid, said the very small change in rates amounts to less than a dollar a month difference on $10,000 in student loans.
So students don't need to consolidate by June 30 to lock up especially low rates.
In the mix
Graduates likely have a mix of student loans, too.
Stafford and PLUS loans disbursed prior to July 1, 2006 -- and not yet consolidated -- carry a variable rate of interest.
However, any federally backed student loans taken out July 1, 2006, or afterward carry a fixed rate.
The maximum fixed rate is 6.8% on the newer Stafford loans. The PLUS loans taken out July 1 and after have a maximum fixed rate of 8.5%.
The maximum fixed rates are not changing.
Sure, borrowers got amazing deals for consolidating last year, thanks to low rates.
"Borrowers locked in rates well below 5% in many cases," said Pat Scherschel, vice president of loan consolidation for Sallie Mae, a leading provider of education loans.
Now, the idea could be to avoid future rate hikes.
Old variable-rate Stafford loans could ultimately climb as high as 8.25% if interest rates kept going up. Old PLUS loans could hit 9%.
If rates go down in the future, however, the variable-rate student loans would go down too. Students who consolidate would not see their rates go down.
By consolidating, grads also can extend the repayment period beyond the standard 10-year plan for a federal Stafford loan.
If you consolidate now, do so during the grace period -- the six-month period after graduation.
You'd lock up a rate of 6.625% by consolidating during the grace period -- instead of 7.25% if you waited too long to consolidate.Labels: financial aid, free education, high school, scholarship, student loans, study abroad |
