Interest rates on student loans will rise 1.93 percentage points on July 1, the first increase in five years for federally guaranteed education loans.
"We got spoiled with low rates, but student loans are still one of the best deals around," says Molly Pearson, student services officer for Spokane Teachers Credit Union.
The U.S. Department of Education plans to hike rates on Federal Stafford Loans issued on or after July 1, 1998, from 2.77 Annual Percentage Rate to 4.70 percent APR. Federal Parent Loans for Undergraduate Students (PLUS Loans) issued on or after July 1, 1998 will increase from 4.17 APR to 6.10 APR.
The department annually resets student loan rates for the coming school year. New rates will be in effect from July 1, 2005, through June 30, 2006.
Students and parents who apply before June 30 could consolidate their Stafford and PLUS loans at the current low rates, according to Sallie Mae, one of the nation's largest servicers of student loans. Borrowers typically must have at least $7,500 in outstanding student loans to qualify and could consolidate their loans at an interest rate of 2.875 percent for the duration of their repayment period.
Sallie Mae offers additional discounts to borrowers with high balances who consolidate their loans and consistently make their payments on schedule for several years. Visit the Sallie Mae website for more information.
Spokane Teachers provides education loans, but does not handle student loan consolidations. If you have questions regarding this, contact Molly Pearson in STCU Student Services at (509) 344-2331.
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