College Loan Rates Plummet
By Joyce Kryszak
Buffalo, NY – Federal college loan rates dropped to their lowest levels in more than thirty years Monday.
That is great news for new college students who are just beginning their borrowing.
But financial experts say it is also good news for those who already have their diplomas.
Consolidation programs, at the new lower rates, could drastically reduce payments - and save thousands of dollars over the life of the loan.
The two percent rate decrease on existing government backed loans, which went into effect July 1, isn't just low - it is an historic low.
Because of the lagging economy, the rates last year, at just under six percent, were already the lowest since the program was started in the mid-sixties.
But now the rate is 4.06 percent.
And that could mean savings in the thousands for many former students, or their parents.
Kalman Chany is a nationally recognized expert on financing college. He said the program lowers payments, by consolidating all of a borrower's student loans under one average, lower fixed rate.
"Down the road, interest rates may rise significantly on these loans, as they've been at prior years' levels," said Chany.
"And this is a very good way for students to help repay their loans, lock in an attractive rate, and if possible, if they want to, they can also extend out the repayment terms in significantly reduced monthly payments."
Interest rates also fell dramatically for new loans, dropping from nearly seven percent to less than five percent.
That will be an automatic savings for those who are now filling out those long applications to finance a new or current student's education.
But for those with existing loans, the good news could easily go unnoticed.
Chany said one survey indicated that more than half those with outstanding student debt don't realize they can save by consolidating.
"And that's really unfortunate, because now with this narrow window of opportunity, when interest rates are so low, it makes sense for anybody who has those loans to at least investigate the process, to see if it's appropriate for them," said Chany.
You can find out more about consolidating or applying for federal student loans at the U.S. Department of Education web site.
There you can find out if you're eligible, and even calculate your potential savings with the online calculator.