RESTON, Va., March 28 /PRNewswire/ -- With interest rates on federally guaranteed education loans expected to rise on July 1 for the second-straight year, time is running out for borrowers to secure today's low interest rates through student loan consolidation. Borrowers who consolidate at today's interest rates -- the fourth-lowest in the 40-year history of the program -- and take advantage of Sallie Mae's repayment benefits, may save hundreds, even thousands, of dollars.
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"Consolidation is the key to avoiding a rate increase," said Patricia Scherschel, vice president of loan consolidation for Sallie Mae, the nation's leading provider of education funding and the largest consolidator of student loans. "With final exams looming, current students and this spring's graduates will soon have a lot on their minds, but it's risky for borrowers to postpone their consolidation homework until the last minute in June. Borrowers can and should start the application process right now."
Interest rates on existing Federal Stafford and PLUS Loans are variable and reset annually on July 1 based on the 91-day Treasury bill yield from the last auction in May, plus a margin of interest set by federal regulation. As the 91-day Treasury bill yield has been trending upward since last year, it is possible that these interest rates will see an increase of 1.5 percentage points or more.
Student loan consolidation helps borrowers manage repayment by combining each of their eligible loans into a single, new, federally guaranteed loan -- a Federal Consolidation Loan -- with a longer repayment term and the convenience of a single monthly payment. The new loan features a fixed interest rate calculated as the weighted average of the rates of the loans consolidated, adjusted up to the nearest 0.125 percent, and not to exceed 8.25 percent. Borrowers who apply for consolidation before July 1 can potentially lock in an interest rate as low as 4.75 percent for the duration of their repayment period.
In addition, Sallie Mae offers borrowers who wish to consolidate an even deeper discount of up to 1.25 percentage points. Eligible borrowers with a balance of at least $10,000 will receive a rate discount of 1 percentage point after making their first 36 payments as initially scheduled. These borrowers will continue to receive the reduction as long as they make payments according to that schedule. In addition, borrowers with a minimum balance of $7,500 are eligible to receive an immediate 0.25-percentage-point reduction in the interest rate on their consolidation loan after they sign up to pay via direct debit.
"Time is of the essence," added Scherschel. "We recommend that borrowers contact their current lenders within the next few weeks to explore their consolidation options and get their applications in place as soon as possible so they can beat the last-minute application rush in June. We don't want to see anyone miss out on getting a good rate deal."
Borrowers may visit http://www.smartloan.com/, where they can complete all of their consolidation paperwork in minutes. The secure online application is designed to meet the needs of spring 2006 graduates, borrowers already in grace or repayment, and continuing students. Borrowers also may request Sallie Mae's convenient concierge service, which will complete applications on borrowers' behalf and then notify them when their applications are ready for review and signature.
SLM Corporation , commonly known as Sallie Mae, is the nation's leading provider of education funding(SM), managing nearly $123 billion in student loans for 9 million borrowers. Sallie Mae was originally created in 1972 as a government-sponsored entity (GSE) and terminated its ties to the federal government in 2004. The company remains the country's largest originator of federally insured student loans. Through its specialized subsidiaries and divisions, Sallie Mae also provides debt management services as well as business and technical products to a range of business clients, including colleges, universities and loan guarantors. More information is available at http://www.salliemae.com/. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.
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