Student borrowers get a break

Kathleen Pender
Tuesday, May 17, 2005


The Department of Education issued a guidance letter on Monday that could potentially save many college students a boatload of money on their student loans. But they'll have to act quickly.
The letter says that students who are still in school and have government- guaranteed Stafford loans from banks or other commercial lenders can lock in today's record-low interest rates by consolidating one or more loans while they are still in school.
The ruling will put students with Stafford loans from banks on a more equal footing with students who have Stafford loans from the government.
The rate on Stafford loans is reset on July 1 each year. It is tied to the rate on three-month Treasury bills at the last auction in May. The rate on loans for students still in school is expected to jump from 2.77 percent today to between 4.5 and 5 percent on July 1.
Students can lock in today's low rate, rounded up to the nearest eighth, by consolidating one or more variable-rate loans into a fixed-rate loan. But their application will have to be received by the lender by June 30.

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