Dear Friend,
Recent legislative changes could have a big impact on the rates charged for student loans. However, some of the impact may be lessened if you take action by July 1.
Earlier this year, President Bush signed into law a deficit-reduction bill that included substantial cuts to the federal student loan program. This legislation included $12.7 billion in cuts to loan program subsidies as well as new rules for borrowers and higher fixed interest rates. I strongly opposed this legislation.
Under the new law, interest rates on federal Stafford loans issued after July 1, 2006 will jump from the current variable 4.7 percent for in-school borrowers to a fixed rate of 6.8 percent. Interest rates on federal PLUS loans (Parent Loans for Undergraduate Students) will jump from the current rate 6.1 percent to a fixed 8.5 percent.
There are some things borrowers can do to reduce the interest rates on their existing loans before the changes contained in the bill go into effect. Current federal borrowers can avoid paying more on their loans by consolidating under the Federal Student Loan Consolidation Program. By consolidating prior to July 1, 2006, borrowers can lock a single fixed rate on their loans, as low as 4.75 percent, and the fixed rate can drop even lower (to 3.5%), after taking into account additional benefits offered by many consolidation lenders. Borrowers should contact their lenders about this Consolidation Program.
It is my hope that students and parents alike will take advantage of these consolidation programs as soon as possible to avoid the change in rates on July 1. In the future, you can count on me to continue to oppose efforts in the Congress to further increase student loan rates or make obtaining a loan more difficult.
source: www.boxer.senate.gov
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