Student Loan Consolidation Hot Topics

So you’re getting ready to consolidate and are wondering what your interest rate will be. That’s certainly a fair question. I mean, when you go out to dinner you don’t pay for your meal before you eat it. You make sure you get what you ordered, that is tastes good, and that the temperature is to your liking. Then, at the end of the meal, you take out your credit card and sign on the dotted line. Why should things be any different in the consolidation world? Don’t sign and then ask questions later. Get the answers you need up front.

Here is an interesting federal consolidation fact. Ten students who graduate from the same university this May could very well have ten different interest rates. But how can this happen?

Unlike in other financial circles federal consolidation interest rates are not tied to one thing in particular, like the Fed Funds Rate. To arrive at your fixed interest rate the consolidation company simply takes the weighted average of all your loans. They look at the interest rate and the amount of each loan, then round up to the nearest eighth percent.

Nowadays undergraduate students are coming out with rates ranging from 3.61% to 6.8%, and end up consolidating for about 5-6%. A lot of grad students carry grad plus loans at 8.5%, which elevates their fixed amount.

Five most recent student loan consolidation blog posts:

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FICO comes from the Fair Isaac Company, which came up with the process of condensing all of your credit information into one three-digit number.

Three major credit bureaus hold your FICO score; Equifax, TransUnion, and Experian, and each calculate it a little different than the others. Should you wish to dispute a mark on your credit report from one of the three bureaus you can write to them like I have done previously (see below for address information).

Equifax Information Services
P O BOX 740256
Atlanta, GA 30374
800-997-2493

TransUnion
Customer Disclosure Center
Trans Union Consumer Relations
PO Box 2000
Chester, PA 19022-2000
800-888-4213

Experian
NCAC
PO Box 9556
Allen TX 75013
888-397-3742

Your FICO score is used in determining your interest rate, and is even used as a barometer for getting a job. FICO scores range between 300 and 850. Ratings are as follows:

Excellent: Over 750
Very Good: 720 or more
Acceptable: 660 to 720
Uncertain: 620 to 660
Risky: less than 620

The formula used to calculate your FICO score includes information based on several factors:

~ 35% on your payment history
~ 30% on the amount you currently owe lenders
~ 15% on the length of your credit history
~ 10% on the number of new credit accounts you’ve opened or applied for (fewer is better)
~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)

Now that you know what your FICO score is and how it is calculated you’ll want to work on getting it as high as possible. I’ll be offering some tips in the coming weeks!

For more information about credit or to apply for a credit card (click here).

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.

Effective July 1, 2008…

Variable rate Stafford loan disbursed prior to July 1, 2006, that is IN GRACE (IG) = 3.6%

Variable rate Stafford loan disbursed prior to July 1, 2006, that is IN REPAYMENT (RP) = 4.21%

Variable rate Parent plus loan disbursed prior to July 1, 2006 = 5.01%

* note that any Stafford and PLUS loan that were taken out before July 1, 2006, and has never been consolidated, will have these new rates

* note that with consolidation, these rates are rounded to the nearest 1/8% which would make them:

3.625% Stafford in grace

4.25% Stafford in repayment

5.125% Parent Plus

I can see from the comments on the previous post that there remains a lot of confusion about when to consolidate. I will answer the questions to the best of my knowledge.

Given the current run rate of the Treasury bill, it looks as though variable student loan interest rates will most likely be going down significantly on July 1st. The last auction of the T-bill will be on May 31st, when the new rate is set. Is there a chance that the rate could go up? Sure – there is always a chance. But given the current trend, it seems very very unlikely. But don’t worry – since the rate is set on May 31st, you will still have all of June to start your consolidation in the unlikely event that the rate increases.

Anyone that has federal student loans taken out prior to July 1, 2006 and has not yet consolidated these loans will be effected by this rate change. So I advise anyone who is thinking about consolidating now, to wait until May 31st when the new federal rate is set. The new rate information will be posted on this blog, and also on SudentLoanConsolidator.com.

For everyone that has a blend of variable rate federal loans (taken out before July 1, 2006, subject to the decrease) and fixed rate federal loans, you will be able to combine all of these loans together when you consolidate.

I do not advise consolidating federal and private student loans together. Doing so would remove all of the federal benefits, and set all of the loans to a variable rate, which is adjusted quarterly by either the LIBOR or PRIME rate indexes. Because federal loan rates are likely to decrease, consolidating federal loans with private loans would cause a significant rate increase.

In addition, the upcoming rate change WILL NOT affect anyone consolidating their private student loan debt. The rate change being discussed is for federal student loans only. Private student loan rates are based on either the LIBOR or PRIME rate indexes and the borrower and/or co-borrowers credit.

I understand how this process can seem a bit overwhelming. So if anyone has additional questions, please feel free to comment. I will make sure that questions and comments are answered on a more regular basis. Also, stay tuned to for the latest rate information once it becomes available.

Well…sort of.

For the past two years, the interest rate increase on July 1st has had a significant impact on student loan repayment. Having gone up nearly 1.8% (180 basis points) each year, the urgency and need for student loan borrowers to consolidate their student loans was truly evident. But what about this year? With rates set to increase 0.076% (7.6) basis points on July 1, shouldn’t everyone with student loans in repayment be rushing to file their applications prior to the deadline?

For a student loan borrower that has $23,000 in student loan debt, the interest rate increase would translate into roughly $11.43 per year – less then $.96 per month. My point is this: Borrowers should research and understand the benefits and drawbacks of student loan consolidation. They should consolidate their student loans for the right reasons, not simply because they are getting pressure from their lenders or other companies to “beat the rate increase deadline.”

The rate change is only going to affect those borrowers who have variable federal Stafford and PLUS loans taken out prior to July 1, 2006. For all federal student loans disbursed between July 1, 1998 and June 30, 2006, the interest rates will increase slightly on July 1, 2007 as follows:

• Stafford loans in school or in grace: 6.62% up from 6.54 %
• Stafford loans in repayment: 7.22% up from 7.14 %
• PLUS loans: 8.02% up from 7.94%

But keep in mind, consolidation is a great financial repayment tool that combines all existing federal student loans into one new federal loan, providing a significantly lower monthly payment. For any student loan borrower with a tight budget looking for monthly payment relief, consolidation would be a very helpful tool. And without any penalties for making extra or early repayments, borrowers can pay back more when it becomes affordable to.

While the July 1st rate increase may not be significant, borrowers who are currently in their grace period (6 months post graduation before entering repayment) should consider consolidating before it expires. They will save an additional 0.6% (60 basis points) off their interest rate.

So, my recommendation is to do your research, look for a company that demonstrates knowledgeable one-on-one customer service and the willingness to discuss both the benefits and drawbacks of student loan consolidation, and don’t rush to consolidate just because of the rate increase on July 1st.

According to the results of the United States 91-day Treasury Bill auction, the interest rate for Stafford loans originated before July1, 2006 increased by 8 basis points. Loans in repayment will change from 7.14 to 7.22 percent. For Stafford loans in an in-school or grace, the rate will change from 6.54 to 6.62 percent. Additionally, interest rates on PLUS loans will increase from 7.94 to 8.02 percent.

For the graduates and parents who have older, variable-rate loans can take advantage of the lower rate if they apply for student loan consolidation by June 30. Also, for spring 2007 college graduates who still have variable-rate loans should apply for consolidation before their six-month grace period comes to an end. By applying in-grace, they can lock in a rate of 6.625 percent, compared to 7.25 percent if they wait until repayment begins this fall.

Also, students and parents who consolidate their Stafford, PLUS using a Student Loan Network Consolidation Loan can also reduce their interest rate by making on time payments and by using automatic debit to make payments electronically. For more details please phone us at 877-328-1565 or visit here.

The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans, Education Loans/College Loans

The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans, Education Loans/College Loans

Student Loan Network

The federal government determines the interest rates for the Stafford Loan program. The rate is determined from when the loan is originated. Please see below for current interest rates for the Stafford loan

Stafford loans disbursed before July 1, 1998 have a variable interest rate that resets every July.

• Stafford loans in grace- 7.34%
• Stafford loans in repayment, deferment, or forbearance- 7.94%

Stafford loans disbursed between July 1, 1998 and June 30, 2006 have a variable interest rate that resets every July.

• Stafford loans in grace – 6.54%
• Stafford loans in repayment, deferment, or forbearance – 7.14%

Stafford loans disbursed on or after July 1, 2006 have a fixed interest rate of 6.8%

If you have questions about what your interest rate would be if you consolidated your Stafford Loans into a fixed interest rate loan please contact a Student Loan Network Advisors. We can research your loan history and estimate your consolidation interest rate for you.
The Student Loan Network: Stafford Federal Student Loans, Parent PLUS Loans, Student Loan Consolidation, Private Student Loans, Education Loans/College Loans

As many of you may already know, interest rates for federal student loan consolidations increased this past July 1. However, the Department of Education has announced that any borrower who began the consolidation process prior to July 1, 2006 and has a substantially complete application, is still eligible to receive last years lower rates. In case you forgot, last years rates are:

4.7% For borrowers in their grace period (6 month’s post graduation)

5.3% For borrowers in repayment

Compare that to the current rates of 6.54% and 7.14%. My suggestion to anyone who aimed to consolidate before the interest rate deadline, is to come visit StudentLoanConsolidator.com or call 877.328.1565 and ask one of our financial aid consultants if you already have an application started. Five minutes on-line or speaking with one of our financial aid consultants could save you hundreds of dollars each month.

Hey everyone… a quick note before the work week officially begins at the Student Loan Network. A HUGE thank you to everyone at the Student Loan Network who burned the candle at both ends and in the middle to get as much done prior to July 1 as possible – and a bigger thank you to everyone who helped to spread the word about the interest rate change.

As the next couple of weeks unfold, we’ll get caught up on all the loan applications, but we promise you this – if you are qualified for consolidation and applied before the July 1 deadline, you WILL get the lower rates. We won’t forget about you.

Happy Independence Day. Hopefully we’ll be celebrating your independence from high monthly payments real soon.

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