Tax Article - Consolidate Student Loans Now To Avoid Interest Rate Hikes
Under the federal loan consolidation program, borrowers can bundle their various federal education loans into a single new loan with a fixed interest rate that's equal to a weighted average of the rates of the consolidated loans, adjusted upward to the nearest 0.125%. Borrowers who apply for consolidation before July 1, 2006 will be able to lock in a fixed rate for the duration of their repayment term that will be based on their current Stafford and PLUS loan variable rates (5.3% and 6.1% respectively). Even borrowers who are currently in school and therefore not yet in repayment may want to consider loan consolidation now, because under the Deficit Reduction Act of 2005, beginning July 1, 2006, borrowers will no longer be able to consolidate their loans while they are in school (nor will they be able to consolidate their federal student loans with those of their spouse). In addition, the Deficit Reduction Act increases the interest rates on new Stafford and PLUS Loans (i.e., those disbursed after July 1, 2006). However, unlike existing student loans that carry a variable interest rate, new student loans will have a fixed interest rate--6.8% for Stafford Loans and 8.5% for PLUS Loans. These fixed rates will make consolidation less of an issue for borrowers. For more information and analysis of the Deficit Reduction Act of 2005, be sure to visit the AICPA PFP Center website. Find out how our expertise in tax and accounting can add value to your business. Email us or call us at 1 (888) 875-9770. related links |
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