Attention Those With Variable-Rate Fed. Student Loansby Tim Manni
Here’s your chance to save thousands: after July 1 you’ll have the opportunity to consolidate your variable-rate Federal student loans into one new consolidated loan. Experts are predicting that when interest rates change on July 1, they will fall to historic lows. Unfortunately, only first-time consolidators can take advantage of these new low rates:
Interest rates on federal consolidation loans are capped — that means they can never go higher than 8.25%. But, there’s no guarantee that they’ll ever be this low again. In fact, the 2009-10 rates, are the lowest interest rates in the history of the federal student loan program. The previous low was in 2004-05 when in-school/grace period rates on the Stafford loan hit 2.77%.
• Stafford Loan Consolidation (In-School/Grace Period): 2.00%
• Stafford Loan Consolidation (Repayment Period): 2.50%
• PLUS Loan Consolidation: 3.38%
Be sure to visit www.loanconsolidation.ed.gov/ to learn more about student loan consolidation.
While these historically-low rates may not be too good to be true, there are a set of “exceptions and caveats” that will exclude some from the program. For example:
- Borrowers with loans originated after July 1, 2006 are not eligible for the new lower rate.
- Private student loans cannot be included in a federal consolidation loan.
- Borrowers who are still in school cannot consolidate their loans until they graduate, as Congress repealed the early repayment status loophole in 2006.
Click here to read the complete set of exceptions.
(hat tip: The Consumerist)