Posted by Brian McCullough
Interest rates are coming down again. Maybe it’s time to refinance your outstanding college debt?
BusinessWeek says wait until July. Why?
Interest rates for student loans are going to be reset on July 1. This reset could be as much as 3 percentage points lower (not basis points, percentage points). This could add up to be the largest single decrease in education loan interest rates in history.
Federal student loans come in two types: Stafford and PLUS loans. Loans of both types made before July, 2006, have variable rates ranging from 6.62% for students in school (or those within a six-month grace period upon graduation) to 7.22% for students who have started paying off a loan.
A Stafford borrower who is repaying a loan and waits until the rates reset should shave at least 2.375 percentage points from current loans. A PLUS loan borrower should see a decrease of at least 3.125 percentage points. Although a wave of refinancing took place in July, 2005, when rates hit 2.88%, there are students who didn’t lock in the lower rate. The typical graduate student, who has an estimated $50,000 in debt, could shave almost $75 from monthly payments and save some $9,000 by consolidating this summer.