Federal Student Loan Consolidation Rates to Drop on July 1, 2002
PHOENIX, Ariz.--(COLLEGIATE PRESSWIRE)--May 14, 2002--College graduation signifies many things for students -- budding careers, independence and new beginnings. Yet, unfortunately for many students graduation also means the start of something else -- student loan repayment.
For some students and their parents, loan amounts can be staggering. According to recent analysis by the Public Interest Research Group, the average debt among student borrowers is now in excess of $16,500.
For this reason, consolidation loans are growing in popularity as debt management tools on account of a 36-year low in interest rates. These rates are expected to drop even further on July 1, 2002. Dave Fenstermaker of Pinnacle Peak Solutions, Inc., a company focused on no- and low-cost aid for college students says, �many students are starting the paper work for consolidation now so when July 1 hits their applications will be further along in processing.�
�Since interest rates on all federal programs are at record lows, it is a great time to consider consolidation,� says Rob Creel, Vice President of NextStudent, a service organization providing students, parents and families with information necessary to understand college finance. �You can save thousands in interest charges by consolidating into one new low fixed-rate loan.�
Federal student loans such as Stafford Subsidized and Unsubsidized loans carry a variable interest rate that is adjusted annually. Federal Consolidation Loans, however, are fixed for the life of the loan. Students who refinance with consolidation loans can lock-in a lower fixed interest rate -- many times up to 3.75 percent lower -- than their previous variable rate.
Borrowers in their grace period or currently in repayment of their federal student loans are eligible to consolidate. Some of the advantages of consolidation include retaining deferment and forbearance benefits, extended repayment programs and drastically lower monthly payments. Also, federal student loan consolidation improves a borrower�s credit score by replacing multiple lenders with the one lender holding the borrower�s new consolidation loan. This is due, in part, to credit bureaus reporting practices.
For example, on $40,000 at 8.25% under a Federal Consolidation loan the borrower can choose to repay the loan under the standard ten-year payback or stretch out the term up to twenty years. In the first instance the minimum monthly payment would be $491, but the minimum monthly payment would drop to $222 with the twenty-year payback, a savings of $3,228 per year. In some cases, borrowers can extend their payments up to thirty years. Additionally, this program has no prepayment penalties.
�The lower payment means that you�ll have more money available to meet other expenses, including car payments, rent, and other household necessities,� Creel says.
Another plus of consolidating student loans is that it is completely free for the borrower, Creel says. There are no fees associated with it and consolidation also minimizes the number of lenders the borrower must deal with.
Borrowers interested in consolidating their student loans can contact NextStudent at 1-800-658-6801 or vhttps://eir website at https://www.nextstudent.com.
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