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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (62352)	5/31/2006 5:28:00 PM
From: shades	Respond to of 110194

Rates on student loans to leap Education is about to get more expensive - I opt for web learning NEO - meeting a bunch of pricks at university to give some Phd a mercedes and tenure is too inefficient. sptimes.com If you don't consolidate now, your variable rate federal education loans will get much more expensive July 1. By HELEN HUNTLEY, Times Personal Finance Editor Published May 31, 2006 -------------------------------------------------------------------------------- Rates on federal education loans will increase dramatically July 1, adding thousands of dollars to the cost of college for many student and parent borrowers. Lenders said Tuesday that the interest rate on existing variable rate Stafford and PLUS loans will jump nearly two full percentage points. That translates to an increase of about 40 percent for students and 30 percent for parents. It's one of the largest rate hikes in the program's history, affecting millions of borrowers. The good news is that borrowers who hold those loans - primarily students currently enrolled and those who recently graduated or left school - can lock in low rates by consolidating their loans before July 1. The potential for savings is dramatic. A typical recent graduate with $20,000 in debt can consolidate now at 4.75 percent interest for a monthly payment of $129. Waiting until July 1 to consolidate at 6.625 percent interest would cost $22 more a month, or an extra $5,123 over the 20-year life of the loan. "Time is money and waiting too long to consolidate your student loans will cost you for many years into the future," said Keith D'Ambra, senior vice president at Sallie Mae, the country's largest educational lender. For those who need to borrow more, there is no escaping higher rates. Congress voted to revamp the loan program this year, switching all new loans from variable rates that change each year to fixed rates that apply for the life of the loan. If they haven't been paying attention to the financial aid news, students and parents are in for sticker shock. Students paying 4.7 percent on their loans last year will find their new loans for the coming school year carry a 6.8 percent rate. Parents who were paying 6.1 percent last year will get new loans at 8.5 percent. Those increases are 40 percent or more. The interest rate switch and other changes in the loan program are expected to save the federal government $12.7-billion over five years. Student groups opposed the changes and lobbied for more aid that would not have to be repaid. "The long-term solution is to move toward funding grant aid for students," said Jeannie Biniek, a senior at the University of California at Los Angeles and a director of the United States Student Association, which organized student lobbying. She said she expects to graduate with $52,000 in debt. Huge debt loads are no longer unusual. The average new graduate who borrowed for college owes $20,500, according to College Loan Corp. The average cost of attending a private four-year college has risen to $29,016 a year, while the average at four-year public college is $12,127, according to the College Board. The debt has a major impact on the lives of student borrowers, according to AllianceBernstein Investments, which last week released the results of an Internet survey of college graduates. Forty-two percent of those who had borrowed for college said they live paycheck to paycheck and 34 percent said they had sold possessions to make ends meet. Some said they had delayed buying a house, having children or getting a medical or dental procedure for financial reasons. A third said they were forced to move back home or live with their parents longer than expected. Because student loans can now be repaid over 20 or 30 years, many borrowers still will be paying on their own loans when it is time for their children to go to college. "The numbers only tell part of the story. The psychological and emotional underside of college debt does not receive the attention it deserves," said Jennifer DeLong, director of college savings plans for AllianceBernstein. While new loans will be at fixed rates, the variable rates will continue to apply to existing loans that have not been consolidated. The variable-rate loans adjust annually based on current market rates. Anyone with old student loans is eligible for consolidation as long as they have at least one loan that has not yet been consolidated. Students who are still enrolled at least half time can consolidate but do not have to begin making payments until after they leave school. After July 1, consolidating your loans while you're still in school will no longer be allowed. Borrowers who have only one loan should call that lender for information about consolidation. Borrowers with multiple loans can consolidate through any lender. Many lenders offer interest-rate reductions as incentives for paying by electronic debit and for three years of on-time payments. Information from Times wires was used in this report. Helen Huntley can be reached at hhuntley@sptimes.com or 727 893-8230. STUDENT LOAN RATES Rates on federal student and parent loans increase July 1, but there's still time to lock in lower rates through loan consolidation. Variable Rate Stafford Student Loan Current Rate New Rate In school, grace or deferment 4.7% 6.54% In repayment 5.3% 7.14% Potential consolidation rate * 4.75% 6.625% Variable Rate Parent PLUS Loan Current Rate New Rate In repayment 6.1% 7.94% Potential consolidation rate * 6.125% 8.0% Fixed-Rate Loans** New Rate Stafford Student Loan 6.8% Parent PLUS Loan 8.5% * Consolidation rate shown is lowest rate possible before lender bonuses.