On July 1 of each year, the rates on student loans are changed. In recent years, this date has come and gone without any cause for concern, but this year is different. The Senate passed a plan to cut $12.7 billion from the federal student loan programme between 2006 and 2011. This was part of a plan to fix the $40 billion budget deficit. All federal student loans, like the Stafford loan, the PLUS loan, the Consolidation loan, and the Perkins loan, will see their interest rates go up by a lot.
- The interest rate on student loans went up.
After July 1, the interest rate on new Federal Stafford loans will go from 4.7 percent (variable) to 6.8 percent (fixed), and the interest rate on new PLUS loans will go from 6.1 percent (variable) to 8.5 percent (fixed). You can avoid these skyrocketing interest rates by consolidating your loans and locking in today's low fixed rate.
- Last chance to combine "in school" words.
Students still in school won't be able to consolidate their loans after July 1, 2006. This is because of a new law. Students who are still in school and recent graduates who are still in their grace period should take advantage of this chance to refinance and lock in the current rate before July 1.
- Spousal consolidations will no longer be allowed after July 1.
The spousal consolidation loan will have another rule about consolidating student loans. Consolidating their student loan payments has made life easier and saved them money for married couples for years. Married couples still have time to take advantage of this chance by applying for a spousal consolidation loan before July 1.
- You can't get away from your lender.
As of July 1, borrowers won't be able to combine their existing Consolidation loans with loans from a different lender. Borrowers won't be able to shop around for better offers and companies unless their current lender doesn't offer a consolidation loan with terms that depend on their income.
Steps to take by July 1 or earlier
Contact a student loan consulting and refinancing lender as soon as possible if you haven't already consolidated your student loans. Go online to compare different online loan companies, read up on loan terms, use online calculators to figure out how much you could save, and get in touch with a student loan consolidation expert with a list of questions.
Student loan consolidation already has a lot of benefits, and now it can protect you from the interest rate hikes that will happen on July 1. Since payments are combined and spread out over a longer period of time, monthly payments are lower. This gives young adults who are just starting out in their careers more money to spend. Also, having only one open loan is better for your credit score than having many open loans, which can lower your overall FICO score.
Students still have until July 1 to refinance and lock in low interest rates and take advantage of other money-saving opportunities and programmes that will be ending soon.
