Student Loan Consolidation Rates Set To Increase On July 1

Student Loan Consolidation Rates Set to​ Increase on​ July 1
Congress voted on​ and passed Feb .​
1 the​ Deficit Reduction Act of​ 2018 that included massive cuts to​ federal student loan programs .​
The $11.9 billion in​ student loan cuts,​ including changes in​ laws regarding student loan consolidation,​ will negatively impact those students seeking a​ college education and others seeking to​ consolidate their higher interest loans .​
The industry expects a​ rush of​ students seeking to​ consolidate at​ the​ current low rates that are set to​ increase on​ July 1.
The Deficit Reduction Act of​ 2018,​ S .​
1932,​ was narrowly approved Feb .​
1 by the​ House of​ Representatives .​
Passing by a​ two-vote margin of​ 216-214,​ S .​
1932 was signed into public law Feb .​
8 by President Bush,​ thereby approving the​ $11.9 billion in​ student loan cuts over the​ next five years.
Students and graduates now are in​ jeopardy .​
With college costs increasing every year and the​ forthcoming higher interest rates on​ student loan consolidation,​ college students are rushing to​ consolidate before the​ July 1 rate increase.
Student Loans Take the​ Hardest Hit
The cuts to​ federal student loans are the​ worst among cuts to​ other federal programs including Medicaid,​ Medicare and food stamps.
A majority of​ the​ legislation's provisions to​ student loans will take effect on​ July 1 and others will be implemented over time .​
Some provisions include an​ increase to​ 6.8 percent for federal Stafford Loans,​ from rates as​ low as​ 4.7 percent .​
PLUS fixed interest rates will jump to​ 8.5 percent,​ from 7.9 percent .​
The legislation leaves consolidation loans current fixed rate in​ place.
Consolidate Student Loans Before July 1 Rate Increase
With student loan consolidation rates set to​ skyrocket on​ July 1,​ now is​ the​ time for students and graduates to​ consolidate,​ according to​ NextStudent,​ the​ Phoenix-based education funding company .​
Students and graduates now are urged to​ consolidate as​ current consolidation rates can be as​ low as​ 2.75 percent with benefits applied .​
Other incentives to​ consolidate include a​ longer payment term,​ one monthly payment and no prepayment penalties.
The following are other provisions affecting student loan consolidation that take effect July 1,​ 2018 .​
Students and graduates should be aware of​ the​ new regulations so that they now can take action:
Consolidation Loan Changes
- Single holder rule is​ not changed
- Eliminates in-school and spousal consolidation options .​

- A subsequent consolidation loan may be made in​ the​ DL Program only if​ the​ FFELP borrower wishes to​ obtain an​ income contingent repayment plan and,​ the​ borrower is​ trying to​ avoid default,​ but that is​ conditioned by the​ requirement that such a​ loan has been submitted to​ a​ guaranty agency for what used to​ be called preclaims assistance but is​ now labeled as​ default aversion .​

- Also,​ in​ the​ Conf .​
Rpt .​
is​ a​ provision providing that only if​ a​ FFELP borrower has an​ application for a​ consolidation loan rejected by a​ lender or​ the​ application is​ rejected because the​ borrower wanted income-sensitive repayment terms,​ then the​ borrower can receive a​ direct consolidation loan .​
- A borrower with a​ defaulted loan can receive a​ DL consolidation loan to​ resolve the​ default .​

- Unless otherwise specified the​ terms of​ DL consolidation loans are the​ same as​ FFELP consolidation loans.
Approval of​ the​ Deficit Reduction Act brings major cuts to​ student loans and a​ change in​ regulations regarding student loan consolidation .​
Although the​ legislation has changed to​ the​ detriment of​ those seeking a​ higher education,​ students and graduates still have the​ option to​ consolidate before the​ interest rate is​ set to​ increase on​ July 1.

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