 |
|
|
May 30, 2002
"Refinancing Student Loans"
Host: Student loans -- you get them, and then they seem to stay with you forever. Now, though, there's a way to lower your payments. Personal finance expert Jordan Goodman says that's good because we're talking about a bunch of money here.
While many homeowners have used recent, low interest rates to refinance their mortgages, many people with outstanding student loans probably do not realize that now is the best time ever to refinance their student loans. But it can be quite tricky to pull off a student loan refinance correctly -- because once you do it, you can’t do it again.
There are currently 16 million people owing $250 billion in student loans, according to the Department of Education. The average graduate from college this year will have $17,000 in loans from a public school and $19,000 from a private school, though it will be far more for elite universities. Federally-guaranteed student loan rates are set each year based on the rate on 3-month Treasury bills in late May for the year starting July 1. Right now, the rate is 4.06 percent. This is the lowest rate ever on student loans, and provides the best chance ever to lock in a great rate on a refinance. If you took out a loan since 1998,your rate should automatically fall to about 4 percent, but if it is before 1998, you will have to initiate it. You have until July 1, 2003, to refinance old student loans to the new lower rate. To refinance, your bank takes an average of the rates on all your federal education loans, rounded up to the nearest one-eighth of a percentage point. You may want to exclude any particularly high rate loans you have because that will bump up your average rate. You might pay off the high-rate loan separately. Go to a major student loan lender, like Sallie Mae at www.salliemae.com or 800-448-3533, to get the best deal when you consolidate and refinance. Some lenders will even cut the rate further under certain circumstances. At Sallie Mae, they will cut the rate by one percentage point if you make 48 consecutive on-time payments. Other lenders will cut rates by a quarter point if you allow automatic debiting on your bank account to repay the loan. Ask your lender if there is any other program you can take advantage of to lower your rate even more.
|
Minnesota Public Radio | Search | Comments | © Copyright & Terms of Use | Privacy |