By Charles Essmeier
The Federal student loan program has benefited thousands ofcollege students in the forty years since it was introduced.Interest rates for the program have historically been quitecompetitive, and the program has allowed many people to acquirea college education who otherwise might not have been able toafford one.
At the moment, interest rates on Federalstudent loans are the lowest in history, but that is about tochange. On July 1, 2005, the interest rates on Federal studentloans will rise, due to an increase in the price of Treasury,bills, to which the interest rates on student loans aretied.
While an increase in interest rates is seldomviewed as a good thing, knowing about it ahead of can behelpful. Between now and June 30, new graduates or those whohave been repaying existing loans can consolidate their studentloans at current rates. The rates currently vary, with fixedrates being slightly higher than adjustable rates. Thoseconsidering consolidation might wish to convert their loan to afixed rate. Depending on the amount of the loan, borrowers mayextend their loan terms to as long as 30 years.
There isalso legislation pending in Congress that would change theFederal loan system so that all future loans are adjustablerate, with no fixed rate option. This will save the governmentmoney by not allowing students to lock in long-term loans at lowrates during times of increasing interest rates. Students whowish to obtain a fixed rate loan may not have much longer to doso.
Rates will vary slightly from lender to lender, andthe market for loan consolidation is quite competitive. Thosewishing to consolidate their loans should consider shoppingaround for the best deal while time permits
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