Time Running Out For Students to Save $$$’s
Cost of financing college going up...way up.....
Students don’t realize that on February 1st, the nation saw the biggest single year increase in the cost of attending college in the history of
Students also don’t yet realize that the recently passed Budget Deficit Act not only allows interest rates to increase to 6.8% for students, and 8.5% for parents, but it also will:
(i) take away the borrower’s right to consolidate their student loans while in school, and
(ii) repeal the borrower’s right to reconsolidate their loans once out of school -- if and when they locate a new lender (same government guarantee and no additional cost to the taxpayers) that will give them a
lower interest rate.
Right now, borrowers who are still in school and immediately consolidate their loans can lock-in 4.7% forever. But if they do not consolidate before 6/30, they are likely to see those rates rise to 6.5% this July, and as high as 8.25% later. The difference could result in anywhere from $5,000 to $50,000 in extra interest charges, depending on a student’s balance and financing period.
As to reconsolidation, right now, any borrower with Direct loans of any type can consolidate or reconsolidate them with a FFEL lender offering even better rates.
Borrowers with a FFEL consolidation loan are unfortunately prohibited by law from directly reconsolidating with another FFEL lender, but can reconsolidate with the Direct Loan Program and then reconsolidate again (with a FFEL lender) to take advantage of better rates. This cross-program consolidation requires some effort, but will savet the borrower a lot of money because there are numerous FFEL lenders still out there who are willing to accept less profit.
Also significant is the ugly truth that on July 1st, student loans will be the only loan product in America that cannot be freely refinanced when a debtor finds a better deal. That all stops, thanks to the 109th Congress, on July 1st.
But if the Congress tried to pull that on homeowners, they’d never get away with it. Students are, however, poorly organized and don’t realize that on February 1st, the nation saw the biggest single-year increase in the cost of attending college in the history of this nation.
-C. Victoria Patrick
Retired Educator and former Student Loan Administrator