Student Rates Hit New Low

The 2001-02 rate was fixed at its lowest level since 1965, when the Higher Education Act first introduced education loans, said Jeff Hanson, the director of debt management services at Access Group, Inc.

The interest rate is 5.39 percent for a standard Stafford loan for students who are still in school, compared to 7.59 percent just a year ago.

"We are in a somewhat unique situation right now," Hanson said.

This is also a good time for students with oustanding loans to consolidate. Consolidating means to take all of one's student loans and wrap them up into a single new loan. The interest rate is fixed on a lower level after consolidation.

"Right now, if a student consolidates, their loans are probably going to be carrying 5.39 percent," said Sue Burdick, an assistant director at the Student Financial Aid Office at UNC.

"So when they consolidate their loans, the loan rate is as low as it can be."

She added that students who are already paying can also benefit.

"If a loan has already been in repayment and the student consolidates, the interest rate will be 6 percent, which is still very attractive."

For most federally sponsored loans, interest rates change once a year, effective July 1, to follow the 90-day Treasury bill.

"We do not have a way to predict how the Treasury bill will be traded next year," Hanson said. "But the rate can easily go up to 8.25 percent," he said, referring to the current cap for education loans.

A one-percent change in the interest rate could mean extra thousands of dollars in interest that the student will or will not have to pay.

Still, most of the students seem to know little about potential savings for them.

"I haven't thought about it," said Julie Collins, a junior from Monroe. "This is something I should discuss with my parents."

Other students were in similar situations. Jennifer Poisson, a junior from Wilmington, said, "I haven't heard about it. My mom filled out all these forms."

Shera Hube of the College Foundation of North Carolina said that it has only been three weeks since the new rate was announced, which could be the explanation for why many students don't know about the benefits of consolidation.

Some people may be waiting to consolidate. "The application for loan consolidation is a time-consuming process," Hube said. "And we did not start sending out information on consolidation yet."

The foundation holds about 90 percent of all Stafford loans at the University, estimated Vince Amoroso, deputy director of the Office of Scholarships and Student Aid.

Hube said CFNC made 5,420 new Stafford loans to UNC-Chapel Hill students last school year.

Amoroso said CFNC's figure is a good estimate for how many students have an outstanding Stafford loan at Carolina.

Staffords, along with PLUS loans for parents, are eligible for consolidation.

Still, the lower interest rate may not always mean less payments over the lifetime of a loan.

Said Amoroso, "A lot of students choose to consolidate because it is the only way to make their monthly payments affordable."

Demetrius Grigolaya can be reached

at demetrius@unc.edu.