<p>Please read the second paragraph of this link <a href="http://clarkhoward.com/shownotes/2006/05/18/%5B/url%5D">http://clarkhoward.com/shownotes/2006/05/18/</a> This individual hosts a nationally syndicated show and is quite reputable. According to his webiste, the current student loan interest rates will rise to 8.5 and 6.8% for parents and students respectively. He strongly recommends that if you have current loans, that you consolidate them before June 30 to get a 4-6% interest rate.</p>
<p>By the way, its the Stafford loans that are going up in a month.</p>
<p>I was doing a Entrance Interview and here's what it said about the Stafford loan.</p>
<p>Subsidized Stafford Loan</p>
<pre><code>* This is a need-based loan.
* Interest on the loan is paid by the federal government while you are in school, during your grace period, and during authorized periods of deferment.
* During periods of forbearance, you will be responsible for interest that accrues on your subsidized loans.
* For current loans disbursed prior to July 1, 2006, the interest rate is variable. This variable rate, which can't exceed 8.25 percent, is adjusted on July 1 each year. For loans disbursed on or after July 1, 2006, the interest rate will be fixed at 6.8 percent.
* You must be enrolled at least half-time to qualify.
* Repayment of principal balance begins six months after you are no longer enrolled on at least a half-time basis.
</code></pre>
<hr>
<p>If someone can explain this to me I'd appreciate it. I just filled and signed my e-MPN today (6/3/06) so does that mean my interest rate will be fixed?</p>
<p>The education loan program is changing a bunch of rules as of July 1st, 2006 - the new rules go into effect for any loans tht are disbursed as of July 1st and this applies to Stafford Student Loans and Parent PLUS loans.</p>
<p>Some of the rule changes include:</p>
<p>Interest rate changes - Stafford Student Loans -
current Stafford and PLUS loans are variable rate loans and their rates will go up in July. Any loan that is disbursed after July 1st will now be at a fixed rate. We are talking about rate changes 5.3% to 6.8%.</p>
<p>PLUS Parent Loans - currently they are variable rate loans at 6.1% and these rates will go up in July. Any new PLUS loan disbursed after July will have an interest rate of 8.5%</p>
<p>There are a bunch of other changes but I don't want to confuse you so let's just stick with the rate changes and what the MPN ( Master Promissory Note) & entrance interview was trying to tell you.</p>
<p>Besides the interest rate changes (increases) they were also trying to tell you that you are entitled to have your payments deferred while you are in school. If your loans are not subsidized by the federal government, interest will accure but you don't have to pay it - you can let it ride and they will include this in your repayment terms when you graduate. If the interest is subsidized the feds will pay this on your behalf while you are in school and during your six month grace period after you graduate. You are entitled to a six month grace period after you either leave school or graduate - this six month grace period is intended to give you some breathing space before you have to make monthly payments on your loan. </p>
<p>The forbearance is another option, basically an interest only, period of time where you can defer your principal payments for a temporary period - usually you would get a forbearance if you can't make a payment or due to hardship, unemployment - things like that.</p>
<p>The bottom line to all of this is (1) your interest rate will be 6.8% fixed on any new loans you have; (2) you have to repay this loan after you leave or graduate from school and you have 6 months before this payment starts</p>
<p>Does that help?</p>
<p>That certainly helps. Thanks. It's good to know my interest rate will be fixed.</p>
<p>Is there a minimum amount of loan that can be consolidated? Student just graduated with $5100 (combination of subsidized/unsubsidized.) Certainy small compared to many others but a dollar is a dollar. Student hopes to secure an Americorp position that after a year will wipe out most of that loan but the offer hasn't come through yet. Any advice?</p>
<p>According to my daughter's fin. aid counselor, it may be unwise to include any moneys received from Perkins loans along with the consolidation of the Stafford loans...especially if your son/daughter would be interested in pursuing loan forgiveness following graduation through government hire in teaching in a low-income or high-need area. Consolidation of those Perkins loans would mean a loss of the possibility of loan forgiveness.</p>
<p>Here's the info. straight from SallieMae's site:</p>
<p>We recommend that only Stafford borrowers request early repayment if they plan to apply for a Sallie Mae Federal Consolidation loan by June 30, 2006.
Federal education loans that carry fixed rates of 5%including Federal Perkins Loans, Health Professions Student Loans (HPSLs), and Loans for Disadvantaged Students (LDSs)have valuable federal interest subsidies during in-school, post-school grace, and any subsequent deferment periods. If any of these loans are put into a federal consolidation loan, the part of the consolidation balance attributable to these 5% loans loses the federal interest subsidy. You can consolidate these loans later: after you leave school and your grace period ends.</p>
<p>Agree with all of you about not including Perkins - another thing about Perkins is you get a 9 month grace period after you graduate before you have to start making payments- so there is another reason to let this loan ride unless down the road you change your mind.</p>
<p>As for min balance to consolidate or not - the reason to consolidate is (1) fix the interest rate so you are not subject to any more rate increases; (2) get a longer time to payback the loan.</p>
<p>On your standard student loan generally the max term to payback is ten years but on a consolidation loan you can get up to 30 years depending on what amount you owe.</p>
<p>Now don't get freaked out how long they give you to payback because these are all simple interest loans that do not have any prepayment penalty - so the trick is to get the longest possible term, lowest possible payment just so you know you can absolutely make that monthly payment and keep your credit clean. Each month as you look at your budget send in as much as you can afford which will pay down the loan faster ergo lower finance charges BUT it doesn't commit you to that payment incase you have a bad month and can only make the min payment?</p>
<p>If you have less than $7,500 in federal education loans, consolidation isn't really going to do much for you as far as lowering your payment or giving you a longer time to pay back the loan - even in consolidation program the repayment term will still be about 10 years. Again, the only really good thing about consolidation is locking down your interest rate and if your loans are scattered all over the place getting set up with one lender, one payment and one bill.</p>