June 2007
Consolidating Federal
College Student Loans by July 1st Could Save You Money
Dear Friend,
Earlier this year, the House passed the
College Student Relief Act of 2007 to cut college
tuition loan interest rates and help make higher
education more affordable for more people.
Unfortunately, such relief remains out of reach for many
students and families because the bill has not yet
passed the Senate.
And now, to make matters worse, the
U.S. Department of Education is expected to increase
interest rates on variable rate Stafford loans to 7.22
percent in July. People with Stafford loans will see an
increase to 8.02 percent. Those with variable rate PLUS
loans will also see an increase.
The good news is that there is a way
for many people to save on those interest costs: loan
consolidation. Consolidation of variable rate loans
allows borrowers to combine separate loans into one, and
to lock in a lower fixed interest rate. This can save
thousands of dollars over the life of their loans.
Student borrowers who have applied to
consolidate federal variable rate loans by June 30 could
see a drop in the interest rates by six-tenths of a
percent over the life of the loans. Graduates who are
still in the six-month grace period before beginning
repayment can receive an even lower rate. This is a
great opportunity to reduce your education debt. I urge
borrowers to consider consolidation before the July 1,
2007 rate increase.
However, consolidation may not be for
everyone. Although interest rates and minimum loan
payments may be reduced, the terms of the loans may
actually be increased. Borrowers should be aware of such
trade-offs in making a decision about how best to handle
educational debt.
Borrowers considering consolidation
should start off with a list of outstanding student
loans to see if they have variable rate loans and could
benefit from the fixed rate provided by consolidation.
Then shop around for the best deals. Ask lenders for
their six-digit federal lending code, which shows that
they are regulated by the Department of Education.
Since 2001, tuition and fees at
four-year public colleges have increased by 40 percent.
The typical student borrower now graduates from college
with $17,500 in education debt.
For more information about student loan
consolidation, contact the U.S. Department of Education
at 1-800-557-7392, or visit their website at www.loanconsolidation.ed.gov or contact your lender.
Aloha,
Neil Abercrombie
Member of Congress
