A law just passed by Congress gives college graduates who may have relied on student loans to get through school a chance to cut back on the amount of money they owe. Current students could also save.
Students and graduates can take advantage of today's lower interest rates by essentially refinancing their student loans, but the deadline for applying is Jan. 31, 1999.
The Higher Education Amendments of 1998 allow student loan holders to apply for a consolidation loan from the Department of Education's direct loan program at an interest rate of 7.46 percent. This rate is significantly lower than the existing rate on most student loans. Although the interest rate on a consolidated loan would be adjusted annually, it would be based on a lower interest rate formula for the life of the loan. The Department of Education estimates that most students who consolidate their loans would save about $500 per $10,000 of debt on an average 10-year loan.
For borrowers still in school, the new rate is only available to students who hold only direct loans. A student who holds a mix of different kinds of student loans would not be eligible.
For graduates with loans, the following conditions apply:
* At least one Department of Education Direct Loan or Federal Family Education Loan must be included in the consolidation.
* There is no consolidation fee or minimum balance.
* A loan holder can consolidate a single loan, an existing direct consolidated loan, or several loans.
* A loan holder can choose which of his or her loans to consolidate or may choose to consolidate all loans.
Loan holders can obtain more information and an application by contacting the Department of Education Direct Loan origination center at 1-800-557-7392 or online at http://www.ed.gov/DirectLoan
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