Kiplinger's Personal Finance Magazine - Grads Get A Break - drop in student loan interest rates; top-yielding mutual fundsCOLLEGE | Make the most of PLUMMETING RATES on student loans.
THE BURDEN of repaying student loans will soon get a little lighter. The rate on Stafford loans, currently 8.19%, could drop as much as two percentage points on July 1. For PLUS loans for parents (and Stafford loans issued before July 1998), the rate could fall to as low as 7%. Look for the new rates on our Web site, Kiplinger.com.
If you're repaying loans now, you don't need to do anything because the rate automatically adjusts each year. Most borrowers will see their payment drop to reflect the lower rate. But if you want to lock in the low rate for the remaining term of your loans, roll them into a fixed-rate consolidation loan before July 1, 2002.
Recent grads, please note: An even lower rate applies for the first six months after graduation--probably about 5.6% as of July 1 for loans taken out after July 1998. And if you consolidate during that six-month period, you can lock in the low rate.
If you do consolidate, beware of signing on for a longer repayment term, which will increase your total interest. "Most people take out consolidation loans for payment relief, so the term is set at the longest repayment period allowed," says Patricia Scherschel, an executive with Sallie Mae, which funds and services the loans. If you can afford the payments, keep the standard ten-year repayment term. For details, call Sallie Mae's information hotline at 800-448-3533.
