Washington, D.C. - Rep. Howard Berman today strongly urged students and parents to consolidate their federal college loans before July 1, 2006, when interest rates on outstanding loans are expected to rise to their highest rate in six years. Consolidation allows students and parents to combine their separate loans into one and lock in a low fixed interest rate – which could save borrowers thousands of dollars over the life of their loans.
“Student and parent borrowers have a little more than one month left to consolidate their college loans before interest rates rise again. I strongly urge borrowers not to miss this opportunity to save thousands of dollars in interest costs on their loans,” said Rep. Berman (D-CA. “Do not delay: Consolidate your loans as soon as possible, and certainly before it’s too late. This is a critical way to reduce your education debt.”
Each year on July 1, the U.S. Department of Education adjusts the interest rates on outstanding college loans. Interest rates on student loans are expected to rise to just over 7 percent and interest rates on parent loans are expected to rise to 7.8 percent. Student borrowers who consolidate their outstanding loans before July 1 would be eligible to lock in an interest rate as low as 4.75 percent, which would save an average of nearly $3,500 over the life of the loan. Parent borrowers who consolidate before July 1 would be eligible to lock in a rate as low as 6.1 percent over the life of their loan.
Since 2001, tuition and fees at four-year public colleges have increased by 40 percent. The typical student borrower now graduates from college with a record $17,500 in education debt.
House and Senate Democrats have also proposed cutting the interest rates on new college loans in half.
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Consolidating College Loans Before July 1 Could Save Students and Families Thousands of Dollars When Paying for College
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 online 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.
