Our Financial Aid department has not done a particularly good job of keeping
us up-to-date on loan consolidation. Since important deadlines are coming up
soon, let's blog a bit about what students should be doing on the consolidation
front. Disclaimer: I'm just figuring this out myself. I'm hardly an expert.
It's important to figure this out now, in the next few
weeks. Student loans rates are set each July. Over the past year, the Federal
Reserve has been raising interest rates significantly,
and is expected to continue. Those rates will be reflected in student loan rates
starting July 1. What interest rate will be imposed on July 1? They'll take the
91-day T-bill interest rate from the auction at the end of May, and add-on a few
percentage points that vary depending on your current repayment status and when
you borrowed. See the chart below from FinAid.com:
| Date Disbursed |
Type |
In-School Rate |
Repayment Rate |
Cap |
| 7/1/1998-present |
Stafford |
91-day T-bill + 1.7% |
91-day T-bill + 2.3% |
8.25% |
| 7/1/1995-6/30/1998 |
Stafford |
91-day T-bill + 2.5% |
91-day T-bill + 3.1% |
8.25% |
| 7/1/1994-6/30/1995 |
Stafford |
91-day T-bill + 3.1% |
91-day T-bill + 3.1% |
8.25% |
How much are rates expected to go up? Well, the rate from last May's auction
was 1.07%. We don't yet know the rate from this May's auction. But last week's
auction was 2.8%. You can find the current T-bill rate at the Treasury website.
Click the Go button next to Treasury Bills, specify 13-week and your date range,
and click Search. Since the Treasury department continues to borrow more money
and the dollar continues to decline, you can be almost assured that rates will continue to
rise in the years to come.
Example: Since I'm currently in-school, if I consolidate before
the July 1 deadline, I'll pay the 1.07% from last year's auction plus 1.7% for
a locked-in rate of 1.77%. Over the course of the loan, I'll save around
$20,000.
Finally, even if you're not graduating, you might still want to check out
consolidation now, as the Bush Administration and the Republican Congress are
considering eliminating the ability of students to consolidate their loans.
So let's get started. First, find out how much money you've
borrowed. As someone who's just been borrowing and borrowing with abandon for
the past seven years, I didn't have a clue. Fortunately, there's one convenient
website that provides a summary of your loan amounts. If you have your DOE/FAFSA pin handy, head to the National Student Loan Data System. Click on
the non-obvious link, Financial Aid Review. The resulting chart lists
all the different amounts you've borrowed from the several different programs,
but not interest rates. You ma