Who would have thought...
Stafford and Plus loan rates lower than the Perkins!!!!
By Cheryl Billinger
As of July l, 2002, variable interest rates on Stafford and Plus loans will be at an all time low. Rates will be 3.46% during in-school/grace and 4.06% during repayment for Stafford loans. Plus rates will be $4.86%. On the consolidation front, students can lock into a fixed rate of 3.5% for loans taken out after July, 1998, if they consolidate after July 1 and during their in-school and grace periods. If they consolidate during repayment, rate will be 4.13%. If a student has loans prior to 1998, a formula is computed using a weighed average of all loans.
How will these new rates affect student borrowers, schools and lenders?
Jeanne Mott, Director at Baker University says, "As a private college, our students who would borrow already do, so we do not anticipate a major increase in basic loan amounts." However, she would not be surprised if their adult learners didn't take advantage of the lower rate and borrow the maximum.
Lynn Tindall, CSOBA states, "With the good news always comes a point of caution. Low rates today should not be construed as a reason to increase current borrowing to pay for educational expenses". Student must be advised to use common sense in regards to borrowing. Just because the rates are low now, doesn't mean that rates will not go up again before the student graduates. We must remember that there is a cap of 8.25% on the Stafford and 9% on the Plus that can affect the student in the long run.
Lenders/servicers will see an increase in requests for consolidation, thus increasing the size of their consolidation units. "Interest in consolidation comes not only from the borrower but from schools. I've had many schools comment to me that this is the first time in their tenure as a financial aid professional that they've actually encouraged most, if not all, students to consolidate", comments Kathy McConnell of ASAP/Union Bank and Trust.
Phil Van Horn of Wyoming Student Loan Corporation says it best regarding the upcoming consolidation option. "Those who consolidate after July 1 will certainly have the advantage of long-term, low fixed rates and more power to them. They have the good fortune of being in the right place at the right time".
It is still up to all of us to counsel the student regarding borrowing whether the interest rates are up or down. They will be paying on these loans for a very long time. It is not free money... it is a LOAN.
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