Students, Recent Grads Have Until July 1 to Lock in Lower Interest Rates

By US Representative Diana DeGette

If youre a college student or recent college graduate, would you be willing to spend a few minutes to save $6,000 or more? If your answer is yes, you have until June 30 to find out if you are eligible to lock in lower interest rates on your student loans. Otherwise, the next day, on July 1, interest rates on many student loans will be increased.

Student lenders are expected to raise interest rates about 2 percentage points next month. The most common student loans, Stafford loans, may rise to about 4.6 percent from the current 2.88 percent for students still in school, in the after-school "grace" period, or with loans in deferment. For loans in repayment, rates could climb to about 5.38 percent from the current rate of 3.37 percent.

While a two percentage point increase may not seem like much, the difference between today's rates and the expected increase can really add up over time. Consolidate a $20,000 Stafford loan at 2.88 percent and you'll pay $110 per month, including about $6,300 in interest over 20 years. A student who misses the deadline and consolidates after July 1st and after his or her grace period ends, would pay 5.38 percent if rates rose two percentage points. That would double the interest cost, to about $12,700.

Another reason students might want to consider consolidating their loans at todays fixed rate is to extend the life of their loan 20 or 30 years, which can result in a lower, more affordable monthly payment.

To consolidate, you first need to know all your outstanding loans and their interest rates. If your loan records are not quite up to date, you can visit the National Student Clearinghouse Web site at http://www.studentclearinghouse.org, click on "students and alumni," then on "loan locator." You must have your Social Security number and date of birth to receive your loan information.
With Congress considering major changes to the student loan program, there is extra incentive to act now.

I am disappointed to report that the final 2006 Congressional Budget Resolution, which I opposed, reduces higher education funding by $2 billion in 2006 and $12.65 billion over five years, jeopardizing some student loan programs. The budget could also hurt students by raising loan fees, ending students ability to consolidate their loans at a fixed interest rate, and completely eliminating Perkins loans. As a result, nearly 500,000 college students could actually see their financial aid cut next year if this budget becomes law.

Reduction to financial assistance could have a devastating effect. In Colorado, a record number of students are attending institutions of higher education. These students are working hard to ensure that they are qualified for decent-paying jobs after the graduate. But with tuition costs continuing to increase, it is critical that the federal government must do more, not less, to ensure that financial aid is available to these students.

As our nation faces an ever-increasing global competition, its critical that every qualified student has access to an affordable higher education. I will continue to fight to make student loans, grants, and work study available to all families who need them. Access to college must be based on a students hard work and achievement, not on a familys bank statement. In the meantime, if you have outstanding student loans, check today to see if you can lock in lower interest rates. By anyones math, a few minutes of time to save thousands of dollars is a good investment.

US Rep. Diana DeGette is in her fifth-term representing Colorados First Congressional District