If the studnet loan rate decreases this July 1st (2008), will that decrease my current Stafford loan rates?
Written By: admin on December 9, 2009
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I currently have my first 2 years off Stafford Loans consolidated @ 4.75%, but my loans from the past 2 years are at 6.8%. If rates drop in July, will that decrease my 6.8% rate on my unconsolidated Stafford loans?
In this case should I wait to consolidate?
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Tags: Loans, stafford loansTags: stafford loans
For the consolidation loans, the answer is NO. When you consolidate, you lock in the interest rate so that it is fixed for the remaining life of the loan.
For the other two loans, it sounds like they are the new, fixed rate loans. Any Stafford loan disbursed on or after July 1, 2006 no longer has a variable interest rate. The interest rate for Stafford loans disbursed on or after that date is 6.8% fixed for the life of the loan. This means that any interest rate determinations made on July 1 of every year (which will still be calculated because there are thousands of students still repaying the ancient variable rate Stafford loans), does not effect your fixed interest rate loan.
Therefore, consolidating to try and lock in a low, fixed interest rate is now obsolete because the interest rate is fixed at 6.8% anyway. You are better off waiting until you have completed your college education, then consolidating into one single loan before entering repayment. They will take the average of your fixed rate loans and your existing consolidation loan to come up with the new interest rate (which will also be fixed as a result of consolidation).