College students and recent graduates are rushing to refinance their student loans in advance of an imporant deadline: July 1, 2006. After that date, students could face a sharp increase in the interest they pay on their loans. And the hike could mean thousands of dollars over the course of a loan.
As a result, there is a dash of students who hope to lock in their current loan rate before what is expected to be a sharp interest-rate increase, estimated at nearly two percentage points.
After dipping to a low of under 3 percent, the common Stafford student loan now stands at around 5 percent. But Saturday, they are expected to rise to an average of around 7 percent. The change will affect undergrads and graduates differently, with graduates paying nearly 7.14 percent interest.
Michele Norris talks with Steven Burd of The Chronicle of Higher Education about locking in rates and consolidating student loans. Burd explains the impact on students and loan companies.