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Watson:  “Student Loan Interest Rates Change July 1”

Jacksonville, IL….State Representative Jim Watson (R-Jacksonville) is encouraging students to explore loan consolidation options prior to the beginning of next month.

Effective July 1, 2006, the U.S. Department of Education is raising its interest rates on student loans as part of the overall Federal Deficit Reduction Act of 2005.  Anyone with an unconsolidated student loan will see their interest rates increase by 1.84% (refer to chart below). 

“If students out of school or close to graduation consolidate their Stafford or PLUS loans before July 1, 2006 they will be able to lock in their current interest rate” said Watson. “However if they delay past July 1, 2006 the lowest they will be able to lock in for the life of the consolidated loan will be 7.14% in repayment status.” 

According to Watson consolidating student loans can be a beneficial cost savings measure.  It offers an interest rate that is fixed for the life of the loan.  Furthermore, the repayment schedule is much more flexible because it can take annual income into account when loan terms are negotiated.  Once you consolidate your student loans, however, repayment will begin immediately; there will be no grace or deferment period. 

“Beginning July of 2007 eligibility criteria for loans will be expanded to allow for more participants and the maximum loan amount borrowed during your freshman and sophomore year will increase” said Watson.  “Furthermore, two new grant programs are created to encourage students to major in science, technology, engineering, and mathematics.  In the meantime, it’s important to explore your loan options.” 

Watson added that it is important for students to call the Illinois Student Assistance Commission at 1-800-899-4722 before July 1^st to learn how to consolidate their existing student loans and lock in at a lower interest rate.    

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