>Interest Rates Drop Slightly on Some Federal Student Loans

>Interest Rates Drop Slightly on Some Federal Student Loans
Loans issued on or after July 1, 1998 through June 30, 2006

If you have a federal Stafford or PLUS Loan issued July 1, 1998 through June 30, 2006, the interest rates on these loans reset every July 1. Beginning July 1, 2010, the new interest rates are 2.47% for Stafford Loans in repayment status (down from 2.48%); 1.87% for Stafford Loans in school, grace period, or deferment status (down from 1.88%); and 3.27% for PLUS Loans in repayment status (down from 3.28%). These new rates will be in effect through June 30, 2011, when they will reset again.

Federal loan consolidation
If you have more than one of these variable rate federal student loans, you can convert your variable interest rate to a fixed interest rate by consolidating your loans under the federal government’s loan consolidation program.
The interest rate on a consolidation loan is a fixed rate that’s equal to the weighted average of the current applicable interest rates on the loans being consolidated, rounded up to the nearest 1/8th of a point (and capped at 8.25%). For example, suppose you have three separate variable rate Stafford Loans that you’re currently repaying. If you consolidate them, your new fixed interest rate for the life of the loan would be 2.5% (2.47% rounded up to the nearest 1/8th of a point). Lowering your interest rate can potentially save you hundreds or thousands of dollars over the life of the loan.
There are some things to keep in mind about loan consolidation:
• You can only consolidate your loans once, so if you did so previously, you can’t do it again
• You can’t add private student loans into a federal consolidation loan
• If you’re still in school, you can’t consolidate your loans–you must wait until you graduate
If you are eligible to consolidate your loans, you’ll need to go through the Federal Direct Loan Consolidation program. For more information, visit www.loanconsolidation.ed.gov.

Loans issued on or after July 1, 2006
If you have an unsubsidized Stafford Loan or PLUS Loan issued on or after July 1, 2006, your loan will have a fixed interest rate for the life of the loan. For unsubsidized Stafford Loans (“unsubsidized” means the federal government does not pay the interest while you are in school or during grace and deferment periods; these loans are not based on financial need), the interest rate is 6.8%. For PLUS Loans, the interest rate is 7.9%.
However, for subsidized Stafford Loans (“subsidized” means the federal government pays the interest while the borrower is in school and during grace and deferment periods; subsidized loans are based on financial need), the interest rate for the period July 1, 2010 through June 30, 2011 is 4.5% (the rate will decrease to 3.4% for the period July 1, 2011 through June 30, 2012).

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This information was developed by Forefield, Inc. an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results.

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