To celebrate the historically
low interest rate for student loan consolidation and to call on Congress to
keep the fixed rate option, student and consumer organizations joined by Congressman
George Miller hosted a 'Graduation Party for Student Borrowers' on Capitol Hill
today. The groups-- the State PIRGs' Higher Education Project, the U.S. Student
Association, the Consumer Federation of America, and the National Education
Association --encouraged student borrowers, particularly recent graduates, to
consolidate their student loans before interest rates jump by nearly two percentage
points this July 1st.
"Locking in a low fixed
rate by consolidating should be the first gift that graduates give themselves,"
said State PIRGs' Higher Education Project advocate Kate Rube. "Borrowers
have only three more weeks to take advantage of this great deal." Joining
the student and consumer groups at the event were several college students and
recent college graduates, who came to the event on Capitol Hill in caps and
gowns.
"Over the next few
weeks, graduates should seize this opportunity to reduce the cost of their higher
education," said Congressman George Miller, "But because millions
of students and families are struggling with the high price of college, Congress
has a responsibility to create other ways to make higher education more affordable,
now and in the future. Students should never miss out on a higher education
because they can't afford it."
By consolidating student
loans before July 1st, borrowers can lock in a historically low interest rate
and save thousands of dollars in repayment. Interest rates will increase by
1.93 percentage points on July 1st, the largest annual increase since 1980.
For the average undergraduate borrower with $19,000 in loan debt, consolidating
loans after July 1 will cost nearly $2,100 in increased interest payments on
a ten-year repayment plan.
"Too many students
are emerging from college these days loaded down with crippling debts,"
said Anna Petrini, legislative assistant at the Consumer Federation of America.
"Congress needs to ensure that these student borrowers will have the ability
to consolidate their student loans at an affordable fixed rate."
The Department of Education
recently clarified that even student borrowers still in school can consolidate
their current student loans and lock in an interest rate of 2.77 percent. Although
some students who consolidate while in school may need to forgo their 6-month
grace period before payments begin, the repayment savings may be worth it for
many borrowers. Borrowers who consolidate after their grace period can lock
in a rate of 3.37 percent. Parents with federal PLUS loans can consolidate and
lock in a rate of 4.17 percent.
Congress is currently considering
eliminating the fixed rate option in student loan consolidation altogether,
which would force borrowers to pay higher variable rates. Congressman John Boehner
(OH) and Congressman Rob Andrews (NJ) have each sponsored bills that would eliminate
the fixed rate option for student borrowers. Many large student lenders, including
Sallie Mae, are pushing for an elimination of the fixed rate.
A coalition of student and
consumer organizations has launched a campaign to keep the fixed rate consolidation
option alive. In addition to the State PIRGs, CFA and USSA, the coalition includes
the National Association of Graduate-Professional Students (NAGPS), the American
Medical Student Association (AMSA), the American Dental Education Association,
the National Consumer Law Center, and the American Dental Association. In a
letter to Congress last month, these groups stated: "The fixed rate option
in student loan consolidation is an important means for borrowers to make loan
repayment more manageable. Eliminating the fixed rate would raise interest rates
on students and borrowers when many are already struggling in repayment."
"Borrowers need to
examine their loan terms and conditions to make a final decision," said
Jasmine Harris, President of the U.S. Student Association. "Now is the
best time to consolidate student loans, and Congress needs to keep the fixed
rate option alive, because it helps make loan repayment more affordable for
millions of borrowers every year."
