This page is and will continue to be a mixture of fact and speculation. Congress has
been considering reauthorization for several years, and they seem to be addressing
educational funding on a piece-meal basis.
INTEREST RATES:
- Today, the interest rate on student loans is tied to the 91-day T-Bill and is set for the
following year on July 1. Speculation is that the rate will go to 6.8% on July 1, 2006.
- Today the interest rate on student loans is variable, changing each July 1.
- Today the interest rate on consolidated loans is variable, changing each July 1.
- Last year, the interest rate on consolidated loans was fixed, a weighted average of the interest rates of the loans being consolidated, rounded up to the nearest 1/8%.
- Speculation has it that next year – or the year after – the interest rate on consolidated loans will return to fixed, at or above the fully indexed rate now available.
SUBSIDIES:
- Today, the lender receives a subsidy to induce them to make low interest loans to unqualified borrowers.
- Speculation is that the subsidy to the lender will go away and student loans will be at market rate.
- Today, a consolidated loan retains its subsidized/unsubsidized status after consolidation (with some exceptions).
- Speculation is that in the future consolidated loans will no longer enjoy any subsidy.
- Today, a consolidated loan carries the deferment and forbearance applicable to the underlying loans, with the exception that since it is a new loan, the borrower gets back all of the deferment/forbearance time used.
- Speculation is that in the future, consolidated loans will no longer be eligible for deferment or forbearance.
