Interest rates increase soon on student loans
Interest rates increase soon on student loans
Increase coming on July 1
By GARRETT NEESE, DMG Writer
HOUGHTON — Students looking to consolidate student loans for lower interest rates are running out of time.
Starting on Saturday, government-guaranteed loans are going to see sizable increases in interest rates.
Stafford loans, which students take out in their name, will increase from 4.7 percent to 6.54 percent. Those Stafford loans for students not in school or in a grace period will increase from 5.3 percent to 7.14 percent.
For Parent Loans for Undergraduate Students loans, rates will go up from 6.1 percent to 7.94 percent.
By consolidating loans, students would be able to keep rates at a weighted average of the rates of the existing loans.
Tim Malette, financial aid director at Michigan Tech University, said the level of benefit would depend upon each students’ status.
For those people with student loans who have already graduated, he said, the consolidation could be a good move.
Students who have yet to leave school, though, might be better served by staying put instead, Malette said. Consolidating their loans could lead to the elimination of their six-month grace period, forcing them to begin paying off their loans immediately after graduating.
“They really have to look at their own financial situation,” Malette said.
Jason Sullivan, financial aid officer for Finlandia University, urged students to research their options before choosing.
“It’s kind of individual for each person, and what fits their situation the best,” he said.
Nicki Bauldry, an electrical engineering technology major at Michigan Tech, has already consolidated her loan. Her reason was “to get a fixed interest rate.”
Students who don’t have loans yet won’t have a choice. Starting July 1, new Stafford loans will be at 6.8 percent. Plus loans will be set at 8.5 percent for private loans or 7.9 percent through government lenders.
By law, student loans can only be consolidated one time. This leaves those with fixed-rate loans hamstrung in the case of a downturn in interest rates that brings them under the rate to which they’re tethered.
However, Malette said that wasn’t likely to happen, noting the rate was already well above that of the all-time low of 2.77 percent hit in 2004-05.
“I think it’s probably going to be up in this neighborhood for a while,” he said.
Garrett Neese can be reached at gneese@mininggazette.com
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