The past few years have been very attention-grabbing at this time of year; with students and grads awaiting word of where student loan rates would go on July 1st. Things this year are much less eventful for three reasons:
- Last year’s law change prohibits students now from consolidating until graduation.
- The new legislation changed the nature of Federal [Stafford and PLUS] loans borrowed after 7/1/06. Loans borrowed after that date are a fixed 6.8% for Stafford (7.9% or 8.5% for PLUS). You should have already ‘locked’ the rates on all of your variable rate federal loans during the low rate environment of the past three years, making this rate change moot – hopefully that is the case.
- Lastly, the rate change is very minimal. Rates will go up on July 1st to 6.62% from it’s current 6.54% level (that is in-school/in-grace rate; rates are .6% higher for out of grace); variable rates on PLUS loans will go from 7.94% to 8.02%. Not a very dramatic move considering the nearly 2% jump each of the past two years … Loans affected by the new rate are those taken out between 7/1/98 and 6/30/06 that have not been consolidated.
Several consolidation programs have been mentioned in the past because of their borrower benefits: Educational Loan Company, The Loanster, and North Carolina are often discussed because of their deep interest rate benefits (preferable for those using extended repayment options). Key Bank and FinanSure provide the most competitive principal balance credits (beneficial to those planning to pay loans off promptly). Now entering the arena … New Hampshire. A state program that no longer has residency requirements. They are the first program in the country to offer substantial rate reduction benefits immediately (rather than the typical reductions after 3-4 years of on-time payments).
The New Hampshire program offers the following:
- ½% rate reduction for setting up auto pay
- 1% rate reduction when repayment starts
- $250 principal balance reduction after 12 on-time payments
It is unlikely this program will be able to save more time and interest payments for those with large student loan debts opting for extended repayments; it will likely best serve those looking at repaying their student loans off in 10 years or less … another good option available nonetheless. Also, NH has a small required loan minimum (only $5,000); many programs require $20K+ … You can learn more about New Hampshire’s program at: http://www.nhheaf.org/ln_cons.asp … information about all of the consolidation programs is available at the OFS website (http://financialsuccess.missouri.edu).