05.28.08 | Variable Student Loan Rates Drop 3%
The final auction of the Treasury Bill has taken place, and the new rates for variable student loans have been determined. Drum roll please…
3.60% - Stafford loans in grace (down from 6.62%)
4.21% - Stafford loans in repayment (down from 7.22%)
5.01% - Parent PLUS loans (down from 8.02%)
What does this mean? If you have federal Stafford or PLUS loans that were disbursed prior to July 1, 2006, your interest rate is going to drop. So if you were thinking about consolidating your student loans, I highly recommend that you wait until after July 1, 2008. You stand to save a lot of money…
Again, these rate decreases will only effect loans that were taken out prior to July 1, 2006. Any Stafford or PLUS loan taken out after July 1, 2006 has a fixed interest rate, and will not be affected.
[...] interest rates - for graduating seniors, that’s probably freshman and sophomore year loans + Resetting rates take effect July 1 + 3.60% - Stafford loans in grace (down from 6.62%) + 4.21% - Stafford loans in repayment (down [...]
June 2nd, 2008 | #
Woo hoo! So, if my first payment on my unconsolidated loans (my grace period ends) is on July 14th, will I have enough time to consolidate if I contact a lender on July 2nd? Also, do you have any recommendations on who to consolidate with?
June 2nd, 2008 | #
Technically I would say you’ll have enough time to squeeze your consolidation in prior to your grace period expiring - but realistically - whichever lender you choose to go with will probably take up to 6 weeks to process… But fear not, you are still in excellent shape. If your loans go into repayment before the consolidation is complete, remember that you can defer until the consolidation is finalized. Either way, you are going to save a lot of money now that the interest rate has dropped. Finally, you can consolidate with your existing lender, or we also recommend consolidating with Direct Loans. They can be reached toll-free at (800) 557-7392.
June 2nd, 2008 | #
Thank you very much for all the help and information. I’m glad I found this blog. Enjoy the summer!
June 6th, 2008 | #
I have unconsolidated federal loans totalling $30K. About $13K were dispersed before July 1, 2006 and the remaning were dispersed after. Is is a good idea to consolidate all of these together or only the ones dispersed prior to July 1, 2006? Thank you!
June 6th, 2008 | #
This sounds good for existing VARIABLE interest rate loans. But you don’t need to consolidate in order to benefit from the interest rate reset.
My question is what is the new FIXED interest rate and does it make sense to consolidate to a FIXED interest rate?
Thanks for the help.
June 7th, 2008 | #
I thought the rate was based off the May 1st 91-Day T-Bill with the following adjustments:
STAFFORD Loans
While in school, interest accrues at a rate based on that 91-day T-Bill + 1.7%.
Once out of school, interest accrues at a rate based on the same T-Bill + 2.3%.
Wasn’t the 3 month T-Bill at 1.3% on May 1st? That would put out of schoolers at 3.6%, no? Perhaps I have the wrong rates from May 1st.
Thanks!
June 8th, 2008 | #
YAY!!!! Maybe some of my payments will actually go toward my principle now instead of most of it going toward interest =) Great news! Glad I waited to consolidate!
June 13th, 2008 | #
Does anyone know about fixed rate loans after July 1? Also, does anyone know what the cap is on the variable rate loans..i.e., how high can they go up if interest rates increase?
June 20th, 2008 | #
If I have a multiple fixed rate loans drawn after the 7/1/2006 deadline and my repayment does not go into effect until November of 09′, do I have the ability to consolidate my loans and obtain the anticipated lower intrest rates now?
June 25th, 2008 | #
Yep, been waiting a long time for this. Four of my loans are variable, totaling $21000, and since 2004 until about six months ago, I was receiving postcards every day and a letter every month from the lender “advising” me, “YOU HAD BETTER CONSOLIDATE NOW, SINCE INTEREST RATES WILL ONLY GO UP AND UP. YOU HAD BETTER LOCK IN THE RATE NOW TO PREVENT THEM FROM GOING HIGHER IN FUTURE YEARS.” I told this lender on the phone and in an email that the maximum rate is 8.25 percent and I am willing to take my chances over the next ten or so years to see if it drops. I told the same to some for profit college where I had applied for a job, who was trying to sell people on consolidation (back in 2006). So, my time has come. And, guess what? I’m consolidated (with the government - not a private agency) all my loans later this year at the new much lower rate. So, who is now laughing all the way to the bank? Certainly not the loan agency. In fact, they stopped sending those little cards and bigger letters a few months back. I guess they don’t want to tout consolidation now; not certainly when it is in the best interest of the student and not the profiteer.
June 27th, 2008 | #
I’m very clueless when it comes to student loans. I just completed grad. school and I now have nearly $50,000 in loans from that alone. They are Subsidized and Unsubsidized Stafford loans. I haven’t consolidated yet and just received repayment information a few days ago. Can I consolidate now with the new low interest rates? Will the low rate go up eventually? Thanks for any help.
June 30th, 2008 | #
Are these rates guaranteed just based on when you received your loans. I was talking to a banker at my bank and asked him about consolidation and he brought up the ugly word “credit score.” There’s nothing negative on my credit other than my high debt.
July 1st, 2008 | #
My husband just graduated with $163000 in school debt. I am trying to sort through all different types. Can anybody tell me which loans are considered federal and which are private? Got some with appreviations like: GRDCSH, MDACVR, PLUSGB, STFFRD, UNSTFD. Assuming that STFFRD is subsidized federal and UNSTFD is unsubsidized. What is the going interest rate? Seen some as low as 5.99% to 8.50% HELP!!
July 2nd, 2008 | #
I would like to offer some advice to those with their student loans, in response to what I’ve been reading with comments. For those with loans and asking about consolidation, this is what I advise:
If your loans were disbursed prior to July 1, 2006, which means they probably are variable rates, then your interest now is far lower than it had been a few days ago. In repayment, that interest is 4.21%. In grace or deferment, that interest is 3.6%, and the interest is only accruing on that unsubsidized portion while in grace or deferment. This rate is pretty low. Rates are always determined by a T bill and the new rates are announced each May or June, taking effect that July 1. So, these new low rates will be around until June 30, 2009. Considering I’ve seen rates go from 2.7% prior to July 2004 to 7.2% until July 1, 2008, the variable rate could certainly go up again. The max rate is 8.25%, however 3.6% and 4.1% is pretty good. So, I would advise anyone whose loans were disbursed prior to July 1, 2006, to consolidate them now while they are in repayment (and before July 1, 2009). If they are in the grace period or deferment, then your interest rate is 3.6%. I don’t know if you can lock in that rate with consolidation, but if you can, go for it, but do so in the final month of your grace period or deferment, since the payment would be due the following month. This way, you still will have used your grace period or deferment coming to you. As for those with some fixed rate loans (which occurred as of July 1, 2006) and I believe it is 6.8%, that rate will not change. It is my understanding you can consolidate all your loans and if the interest rates are different, which they would be under variable and fixed terms, then your new interest rate would be an average of the two combined. You can crunch some numbers and see what the interest would be with just the one loan at a low rate and the other loans at their fixed rate, and what a combined loan would be at a middle interest rate. And, remember, as you make larger principal payments, the interest goes down, so you have to also consider what your plans are for repayment down the road. The maximum interest accrued is an estimate since if you pay the loans off earlier, than you pay less interest. I hope this helps. As for consolidation, I would recommend the government option. Many private lenders are not offering consolidation, because, Ha ha, they can no longer make a lot of money on the lower interest rates. I’m going with the government in the final month of my deferments. As for Cathe about her husband’s various loans, they sound like some med school loans - some private, some federal. You would have to see when they were disbursed to find out the exact interest rate or your account on line should be able to tell you.
July 2nd, 2008 | #
I graduated in May 2008, but my last disbursement was Fall 2007. I have about $25,000 in loans, Stafford Sub and Unsub with Wachovia @ a fixed rate of 6.8%. My first payment is this month because it has been 6 months since my last semester of disbursement. Can I still qualify for consolidation at a lower rate? I am very uneducated about student loans so I would appreciate any help.
July 4th, 2008 | #
For Emily,
No you can’t consolidate for a lower rate since the loan is at a fixed rate. If you are paying on several loans (different payments) you can “consolidate” them all into one loan, still at the fixed rate of 6.8%. Do a little research on the minimum balance amount to extend your repayments for longer than 10 years. I don’t remember if it is at 25,000, but I do know that 30,000 certainly qualifies for a longer repayment term. If you are limited to the ten year limit, there are several repayment options - like graduated repayments. Look into that on your loan company’s web site. With this you could stretch your payments a bit, paying less the first few years, and more later. You could end up paying more in interest, but if you pay more on the principle in some of those years, then the interest will be less, no matter the length of the note. It’s analogous to taking out a 30 year mortgage, but paying it off in 15 years. You don’t want to strap yourself by HAVING to pay something off in fewer years, but with financial self-discipline, you could set up your loans for a longer term, and just make the effort to pay it down quicker. Also, when in financial crunches, remember school loans have deferments for unemployment and hardship forbearances and other means of repayment help - car and credit card payments do not. Get rid of those creditors first.
July 6th, 2008 | #
What are the incentives for a consolidation loan through this institution? I tried finding information through the website and couldn’t find a word of it. In the past, most institutions gave a 0.25% discount on interest rates with automatic debit. And some gave extra incentives for making ontime payments (e.g., extra 1% discount after making 36 payments). Does anybody know what the current incentives, if any, are?
July 6th, 2008 | #
Susan - Thank you for the information. I am disapoointed, of course, that I can’t take advantage of the lower rate for consolidation, but I can live with 6.8%.
July 7th, 2008 | #
I’m trying to determine which loans to take out for Law school.
I will be taking out the following loans:
$1,500 Perkins (5%)
$8,500 Sub Stafford (6.8%)
12,000 Unsub Stafford (6.85)
I need to take out about $36k more and can choose either a PLUS loan or private loan. The best private rate I received was Prime + 0.375%. Since these new PLUS loans are fixed at 8.5%, would it be better to take the private loan? Can I consolidate private into federal after I finish school? If Prime goes up to 7 or 8%+ then I’d be paying way more than the PLUS loan…
July 14th, 2008 | #
For Jason,
Look into the benefits of a Plus Loan. You should be able to find the information doing a search. With a Plus Loan you may be eligible for unemployment deferments down the road, if need be; you may be eligible for other deferments, if need, be down the road, that you would not get with a private bank loan. And, the interest rate on that Plus Loan may have dropped after July 1. I’m not certain, but do some information searches on that, too. I don’t believe you would be able to consolidate private into federal after school. And, while that interest on a private loan may be less now, I have a hunch it will go up in the future, like the variable rate on one of my Visas. The interest now is below 10%, but I’ve decided to pay as much on that one Visa and lower payments on those with the higher fixed rates and lower balances. Just give it about six months, and you’ll see the prime go up, again. I would go with the PLUS, then you know what you have to deal with, with no surprises later, like people with ARM mortgages found themselves later. And, like I said, you have the benefits of certain deferments with PLUS loans, which you don’t get with a private loan. Good Luck.
July 17th, 2008 | #
To Emily
It is my understanding it is 6 months from the day you drop below half time, not since your last deferment. You should have until October +45 days.
August 1st, 2008 | #
In 1979, when I was beginning college, the prime interest rate was 11.5 percent and student loans were at 3.4 percent — or 70 percent below prime. Now, the prime rate is 5.25 percent yet student loans are 8.5 percent (and adjustable) — or 57 percent above prime. What is going on?
August 14th, 2008 | #
I tried to consolidate my private loans but got a high rate of 9% fixed and 6% variable. My credit is very good so I wonder why the rate is so high? It doesn’t seem to be worth it to consolidate at this time. Does anyone know if the private loan consolidation rates will go down? I applied with citibank.
August 18th, 2008 | #