On July 1, 2006
the interest
rates on
outstanding
federal student
loans are
expected to rise
to just over 7
percent—the
highest rate in
six years—and
the rate on
outstanding
federal parent
loans are
expected to rise
to about 7.8
percent. Student
borrowers who
consolidate
before July 1st
may be eligible
to lock in a
rate as low as
4.75 percent
over the life of
their loan(s)—which
would save the
typical
undergraduate
borrower almost
$3,500 over the
life of his or
her loan. But
students and
parents must act
quickly to
ensure that they
can lock in
these lower
rates.
What is loan
consolidation?
Students and
parents who have
taken out at
least one loan
through the
federal
government's
Federal Family
Education Loan (FFEL),
Direct Loan or
Perkins Loan
programs may be
eligible to lock
in a low fixed
rate over the
life of their
loan(s), but
only if they
consolidate by
June 30, 2006.
Why should
student and
parent borrowers
consider
consolidating
before July 1,
2006?
On July 1st the
interest rates
on outstanding
federal student
loans are
expected to rise
to just over 7
percent—the
highest rate in
six years—and
the rate on
outstanding
federal parent
loans are
expected to rise
to about 7.8
percent. Student
borrowers who
consolidate
before July 1st
may be eligible
to lock in a
rate as low as
4.75 percent
over the life of
their loan(s)—which
would save the
typical
undergraduate
borrower almost
$3,500 over the
life of his or
her loan. Parent
borrowers who
consolidate
before July 1st
may be eligible
to lock in a
rate as low as
6.1 percent over
the life of
their loan(s).
Consolidation
may also deliver
other benefits
to borrowers
such as
eliminating the
need for dealing
with multiple
lenders or
allowing
borrowers to
enroll in
payment plans
based on a
percentage of
their income.
Borrowers who
make a set
number of
on-time
repayments or
who make
payments through
automatic
banking can
obtain
additional
interest rate
reductions.
How can I
consolidate my
loans?
If you have a
Direct Loan
through the
Department of
Education you
can call
1-800-557-7392
or apply on-line
at
http://www.loanconsolidation.ed.gov.
If you have a
loan through the
FFEL program (a
bank-based loan)
you can contact
one of the
companies that
own or service
your student or
parent loan(s).
If you have
loans with more
than one lender
you can chose to
consolidate
through the
Department of
Education or
with any lender
that provides
federal
consolidation
loans.
When is the
deadline to
consolidate and
lock in a low
fixed rate?
The deadline is
June 30, but you
should apply
before then to
beat the rush of
applications.
Can student
borrowers
consolidate
their loans
while they are
still in-school?
Before July 1st,
you may be
eligible to
consolidate your
loans while
you're still in
school.
Consolidating
while you're
still in school
will let you
lock in the
grace-period
rate of 4.75
percent
(borrowers who
consolidate
their loans,
before July 1st,
and while in
repayment will
lock in an
interest rate of
5.375 percent).
Be sure to let
your
consolidation
lender know that
you are enrolled
at least
half-time in
college so that
you will not be
required to
begin repayment
until you leave
school or fall
below half-time
enrollment.
Can borrowers
reconsolidate
their loans?
If you have
already
consolidated
your loans, you
cannot
consolidate
again.
Can borrowers
consolidate
Perkins loans?
Students who’ve
borrowed Perkins
loans, which
carry a fixed
interest rate of
5 percent and
offer loan
forgiveness to
graduates
working in
certain fields
such as teaching
or social work,
should carefully
consider whether
or not
consolidation is
right for them.
If Perkins loan
borrowers
consolidate
their loans,
they lose their
loan forgiveness
benefits.
For more
information
borrowers should
contact the
Department of
Education at
1-800-557-7392
or
http://www.loanconsolidation.ed.gov
.
How are
Democrats
working to make
college more
affordable?
Earlier this
year, the
Republican-led
Congress cut $12
billion out of
the federal
student aid
programs in
order to help
finance tax
breaks for the
wealthiest
Americans. As a
result of this
Republican Raid
on Student Aid,
college is even
further out of
reach for
millions of
American
students and
their families.
In contrast,
Democrats
continue to work
to make college
more affordable.
House Democrats
introduced
legislation, the
Reverse the Raid
on Student Aid
Act (H.R. 5150),
that would cut
interest rates
in half from 6.8
percent to 3.4
percent, for
students with
subsidized loans
- which go to
students with
the most
financial need -
and from 8.5
percent to 4.25
percent for
parent
borrowers,
starting in July
2006.*
Under H.R. 5150,
the typical
undergraduate
student borrower
with $17,500 in
student loan
debt would save
$5,600 over the
life of his or
her federal
college loans.
* Beginning on
July 1, 2006 all
NEW student and
parent loans
will be set at
fixed rates of
6.8 percent for
undergraduate
students and 8.5
percent for
parent
borrowers.
For more
information
please visit:
http://edworkforce.house.gov/democrats/education_raidonstudentaid.shtml
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