Student loan rates slated to increase July 1
By: Jason Gomes
Issue date: 6/2/06 Section: News
Originally published: 6/2/06 at 9:48 AM EST
Last update: 6/7/06 at 12:13 AM EST
Originally published: 6/2/06 at 9:48 AM EST
Last update: 6/7/06 at 12:13 AM EST
D'Ambra encourages students and parents to be careful when shopping for a consolidation lender.
"With the deadline looming, contact your primary lender for the fastest and surest way of securing today's rates. Watch out for misleading marketing materials and get the facts before you sign on the dotted line. Waiting until the 11th hour could put you at risk. Also, if you are a Direct Loan borrower, consider a private lender like Sallie Mae. Private lenders offer principal and interest rate reductions not available in the Direct Lending program."
Students have mixed feelings on consolidating their loans.
"I consolidated last year, so I think I have to consolidate these loans by this year," said Linda Joy, a senior majoring in graphic design. "I have not done that yet, so I have to look into it. I think the process is going to hurt me. I have a lot of loans to pay back, so it is going to make a pretty big difference to pay back the balance."
Shahir O'Shea, a freshman majoring in architectural engineering, agrees.
"I plan on consolidating my student loans. Actually I plan on taking a loan out in a couple of weeks, so I am finishing for this year and paying for next year. I think it will hurt me because it will have me in debt for a long, long time. I think it is not going to help us at all because it is too much for someone who is new to college to have to worry about interest rates going up and how much they have to pay back on it."
Overview of loan consolidation
Consolidation allows for several loans to be combined into a single, larger loan. This is then used to pay the balances on other loans. Borrowers can save a great amount of money by converting the variable interest rate on their existing loans to a single, fixed rate without ever facing future rate increases. The fixed rate on the loan is derived from the average of the variable rates of consolidated loans and then increased to the nearest one-eighth of a percentage point and capped at 8.25 percent.
Consolidation allows the opportunity to lower one's monthly payments by spreading them out over a longer period of time, as much as 30 years, as compared to the standard 10-year repayment on unconsolidated loans.
Loans that are eligible for consolidation include those obtained from the Federal Family Education Loan Program, Perkins Loans, Health Profession Student Loans and William D. Ford Direct Loans.
"With the deadline looming, contact your primary lender for the fastest and surest way of securing today's rates. Watch out for misleading marketing materials and get the facts before you sign on the dotted line. Waiting until the 11th hour could put you at risk. Also, if you are a Direct Loan borrower, consider a private lender like Sallie Mae. Private lenders offer principal and interest rate reductions not available in the Direct Lending program."
Students have mixed feelings on consolidating their loans.
"I consolidated last year, so I think I have to consolidate these loans by this year," said Linda Joy, a senior majoring in graphic design. "I have not done that yet, so I have to look into it. I think the process is going to hurt me. I have a lot of loans to pay back, so it is going to make a pretty big difference to pay back the balance."
Shahir O'Shea, a freshman majoring in architectural engineering, agrees.
"I plan on consolidating my student loans. Actually I plan on taking a loan out in a couple of weeks, so I am finishing for this year and paying for next year. I think it will hurt me because it will have me in debt for a long, long time. I think it is not going to help us at all because it is too much for someone who is new to college to have to worry about interest rates going up and how much they have to pay back on it."
Overview of loan consolidation
Consolidation allows for several loans to be combined into a single, larger loan. This is then used to pay the balances on other loans. Borrowers can save a great amount of money by converting the variable interest rate on their existing loans to a single, fixed rate without ever facing future rate increases. The fixed rate on the loan is derived from the average of the variable rates of consolidated loans and then increased to the nearest one-eighth of a percentage point and capped at 8.25 percent.
Consolidation allows the opportunity to lower one's monthly payments by spreading them out over a longer period of time, as much as 30 years, as compared to the standard 10-year repayment on unconsolidated loans.
Loans that are eligible for consolidation include those obtained from the Federal Family Education Loan Program, Perkins Loans, Health Profession Student Loans and William D. Ford Direct Loans.
