Senator Boxer: Time to Act on Student Loans

[paineinthearse]

Received by email.

Senator Boxer: Time to Act on Student Loans
Date: Thu, 26 May 2005 16:44:55 -0700

I thought you would be interested in the following message.

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Dear Friend:

This July 1 is an important date for anyone with a student
loan. College student loan rates are expected to soar in July.
However, borrowers who act before July 1 can save by converting
their variable-rate loans into fixed-rate loans.

Most types of student loans have variable interest rates that
are readjusted every July 1 based on the yield set at the last
91-day Treasury-bill auction in May. A set percentage is then
added to this rate, based on the type of student loan. Rates
being charged today are at historically low levels, but most
experts predict that rates will rise by about 2 percentage
points on July 1. Borrowers who consolidate their student
loans before the deadline can lock in today's low rates for the
life of the new loan.

Students can refinance all their student loans into one loan
through a process called consolidation, in which the debt
converts from a variable-rate loan that adjusts once annually
into a fixed-rate debt. Consolidation to obtain a fixed rate
is an option even for people who have just one loan. The new
loan rate is calculated on a weighted average rate of all the
loans being consolidated.

To check into loan consolidation, you can visit the Department
of Education's website at www.ed.gov or the loan consolidation
feature at http://loanconsolidation.ed.gov/ . You will find a
questionnaire that will help you to determine if you qualify
and an application form for consolidation.

For those with student loans from banks, the situation is a bit
more complicated but worth checking into. You can check with
your lender for more information.

Sincerely,

Barbara Boxer
United States Senator

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[sigmund]

1. I paid off my student loans ASAP even though the rate was low.

I felt they loaned me the money when I needed it and maybe paying it back freed up money for somebody else.

[newyawker99]

5. Hi sigmund!!

Welcome to DU!! :toast:

[Dora]

2. Thanks for the post

I have direct loans from the gov and I've been considering consolidation but never got around to it.

NOW I'm motivated!

[wtbymark]

3. I consolidated mine with a fixed rate

but i'll still be paying on them until i'm dead.

[NewWaveChick1981]

4. I'm the Director of Financial Aid...

..at a liberal arts college, and while Federal consolidation loans are a good idea for many students, this isn't the whole picture. Make absolutely sure that the loan is a FEDERAL consolidation loan; if the lender simply calls it a consolidation loan, it may be no better than a regular consumer loan. Federal Stafford Loans and other Federal Family Education Loans or Federal Direct Student Loans carry deferment and forebearance provisions that allow students to suspend payments if they go back to school at least half-time or in cases of financial hardship, and Federal consolidation preserves those benefits. Additionally, Federal consolidation also preserves the benefit of having the loan paid in full in cases of borrower death before the repayment period is over and in cases of total and permanent disability. Nonfederal consolidation loans lose those benefits, and in no case would the loan be deferrable or dischargeable.

One thing to bear in mind is that once a Federal consolidation loan is granted, students lose any grace period that they might actually have been entitled to (i.e. someone who has just graduated from college), and repayment of the consolidated loan begins immediately. Also, teacher and military cancellation privileges go away when you consolidate. Because Federal consolidation loans usually extend the repayment period from the standard ten years to as many as 30 years, the borrower will incur much, much more interest than if he or she had stuck to the original 10 years. Yes, monthly payments will most likely be a lot lower, but spread that over a longer period of time, and you have tons more interest paid out.

Just wanted to make sure everyone had the other side of the story. :)

[grasswire]

6. good info, thanks (eom)