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Student Loan Consolidation Rules and Rates Change July 1
By Jadell Forman 90
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If drowning in a plethora of details and higher interest rates doesn't appeal to you, consider consolidating. A consolidation service (such as Collegiate Funding Services) can come to your rescue by simplifying the repayment process, combining all this paperwork into one statement with one payment amount and one due date.
And consider quickly. On July 1, everything changes, according to Financial Aid director Scott Carr.
Come on. I'm busy. Is this really a big deal?
Yes, for two reasons. For one thing, interest rates will increase.
Carr explains, "On July 1, all student loan interest rates will be changing for all loans that have not been consolidated. Students who currently have loans at 4.7 percent, or recent alumni whose loans are at 5.3 percent, will find that their interest rate will suddenly jump to a fixed rate of 6.8 percent."
The rate hike also applies to parents, Carr says. "Parents of students or alumni who are paying on PLUS loans currently have an interest rate of 6.1 percent, but after July 1st that also will change to a fixed rate of 8.5 percent. The difference in what they currently pay versus what they will pay over the life of their loans can be measured in the hundreds and even thousands of dollars."
Wow, that's major. What's the other reason to act by July 1?
The other major change on July 1, according to Carr, involves "the regulations surrounding consolidation loans."
He expounds, "Because the consolidation loan regulations are changing, students or alumni who consolidate prior to July 1 will have their loans paid off with a consolidation loan that locks in our currently historically low rates we see today. This will not be the case on and after July 1."
So, what's a person to do in light of the July 1 change?
"My advice to all students and alumni who have student loans," Carr says, "is to seriously take a look at consolidating prior to July 1. After July 1, the interest on all of your outstanding Stafford loans will rise to the new rate. It will be a fixed rate, so it will not rise any further after that. However, it is entirely possible to consolidate and lock in a lower fixed interest rate if done before July 1."
Not all loans are eligible. For a list of eligible loans, go to: http://www.federalconsolidation.org/eligible.htm.
Got questions? For scenario planning, check out these links to two loan calculators:
https://loanconsolidation.ed.gov/loancalc/servlet/common.mvc.Controller?controller_task=startCalculator
http://www.mycaploan.com/loan/CapCalculator.html
