Loan Rates Jump Significantly

"Student loan rates will rocket in July as a result of Tuesday's Treasury bill auction.

The interest rate on so-called Stafford loans — the most common type of student loan — is expected to shoot up to 7.14% on July 1 from the current 5.3%.

As a result, financial experts are urging students to consolidate their variable-rate student loans into fixed-rate loans before the higher interest rates take effect.

"Everybody should consolidate. This is a good deal that should not be missed," said Kevin Walker, co-founder and chief executive of Consolidation-Comparison.com, a website that aims to help students find the best deal on federally guaranteed consolidation loans."
-Los Angeles Times-

Consolidate Now!

"Got a pile of student loans to pay off? Borrowers with the common Stafford and Plus student loans are likely to see their interest rates jump by about 2 percentage points at the end of May, adding thousands to the cost of repaying a typical loan.

So put July 1 on your calendar. That's the deadline for taking out a new Federal Consolidation Loan to refinance that older, variable-rate debt with a new fixed-rate loan currently charging as little as 4.5 percent. This rate, too, is likely to rise on July 1.

One of the most common student loans, the Stafford Loan, carries a variable rate that adjusts every July 1 by adding 2.3 percentage points to the yield on three-month Treasury bills. For the past year, these loans have charged 5.3 percent.

Because the Federal Reserve has pushed short-term interest rates up during the past year, Staffords are expected to charge around 7.3 percent for the 12 months beginning July 1."
-miami herald-

A nice beginner article on how student loan consolidation works.

"Student Loan Consolidation, also called a Student Consolidation Loan, combines several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer consolidation loans for private loans as well."

"If you or a loved one is paying off college loans, keep reading. You see, a deadline is looming. Interest rates for student loan programs are expected to rise significantly on July 1, and that means the ultimate cost to borrowers will be going up. You can avoid this fiscal trouble, though, by consolidating your student loans. In doing so, you'll be able to lock in the current rate, which is pretty low, historically speaking. You can also save several thousand dollars by consolidating."
-MSNBC, Time Is Running Out for Student Borrowers-

"This study estimates some economic, social, and psychological influences upon defaults on education loans. A logistic regression model was developed for 1,117 borrowers drawn from a 1987 national survey. Besides certain precollege traits and high GPAs, I find that postcollege employment congruent with the undergraduate major reduces default, but institutional selectivity, sector, and loan counseling do not."

Predicting Student Loan Defaults
Thomas A. Flint
Journal of Higher Education, Vol. 68, No. 3 (May - Jun., 1997) , pp. 322-354

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