Attention all student loan holders!
I have an important announcement… Beginning July 1st, students from the Class of 2008 who have variable interest federal student loans can refinance those loans and lock in a low, fixed rate of 3.61%.
That is about 3 points lower than the variable interest rate that was set in 2007. So far, this is the largest one year drop in student loan interest rates on record, and the fourth lowest rate in the history of the student loan consolidation program.
For those of you who havenâ€™t graduated yet, hereâ€™s a brief excerpt from the New America Foundation:
All borrowers with non-consolidation federal student loans that were issued before July 2006 [when the interest rate on new student loans changed to a fixed rate of 6.8 percent] can save big money by refinancing their debt after July 1st of this year. But it is the most recent graduates who can get the lowest rate by consolidating variable interest rate federal student loans during their post-graduation, six month grace period that takes place before student loan repayment begins.
Student Loan Consolidate Rate – An example
Hereâ€™s a great example of how much you could save by consolidating. The average student in the Class of 2008 has $17,000 in federal student loan debt. By locking in the new interest rate, a student with this debt level will save about $2,500 in repayment costs (assuming the interest rate was 7.2% prior to consolidation). The best aspect of the new interest rate is that it is a fixed rate, not variable.
Student loan lenders beware
Due to subsidy cuts made by Congress last year and the recent liquidity issues, most private lenders are no longer offering consolidation student loans which are needed for the refinancing boon to borrowers. So, private lenders have little reason to announce to students that they can lock in a lower rate elsewhere, and if history holds true, most banks will try to convince you that refinancing is not the way to go.
This is particularly true this year since the majority of borrowers who wish to consolidate their student loans are most likely to do so through the Department of Education’s competing Direct Student Loan program. Do we really expect student loan giants like Sallie Mae to actively encourage borrowers to seek Direct Consolidation loans when such a move would require Sallie Mae to miss out on years of interest payments? Unlikely.
Since I just graduated last month (May 2008), you can be sure Iâ€™m going to be consolidating my student loans and locking in this low fixed rate. Be sure to bookmark this page! You do not want to miss out on this opportunity. It’s not very often the government cuts us any slack, so take advantage of this offer while you can. If you are interested, check out the U.S. Department of Educationâ€™s Direct Student Loan program. If you have private student loans that you need to consolidate (you can still get a lower rate), check out NextStudent to compare rates for private lender student consolidation loans.
Source: New America Foundation, 2008
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