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Department of Education Allows Students to Lock In Historically Low Interest Rates While Still In School

The Department of Education recently affirmed that today's college students can benefit from the current historically low interest rates before an anticipated July 1 rate increase by consolidating their existing Federal Stafford loans now -- before they graduate!

Traditionally, federal student loan consolidation -- the opportunity to refinance student debt from a series of loans into a single, fixed-rate loan -- has been utilized by college graduates about to enter or in repayment. However, given the anticipated rate increase and the affirmation from the Department of Education, financial aid offices, FFELP lenders and other education finance advisers are alerting borrowers that in-school consolidation could result in lower monthly payments for a significant number of students.

The table below gives an example of how in-school consolidation would affect the interest paid on a $20,000 student loan assuming a 2 percent rate increase on July 1:

Interest paid over life of loan BEFORE June 30th deadline:

Loan Int. Rate: 2.875%

$ Int. Paid: $6,321

Interest paid over the life of loan with the predicted NEW RATES:

Loan Int. Rate: 4.875%

$ Int. Paid: $11,347

The difference -- when students CONSOLIDATE:

Change in Interest: 2.0%

Change in Int. Paid: $5,026

Under the Federal Family Education Loan Program, full-time students can ask their loan holder to place their loans in repayment status; and then the student should request an in-school deferment from the loan holder. This deferment will allow the student to both lock in today's interest rates and avoid costly monthly payments while still attending school. Organizations such as the Student Loan Consolidation Program can aid students as they move through this process.

However, if current students choose to consolidate their eligible loans while in school, they will lose the grace period that allows graduates to postpone repayment until six months after graduation. As a result, students would immediately after graduation have to begin repayment of any loans that had been consolidated while the student was in school. Despite this drawback, many students could benefit financially from in-school consolidation of their loans.

"With the expected significant rise in student loan interest rates on July 1, the opportunity for students to consolidate while in school, gives these students a valuable debt management option," said Jean-Marie Lovett, vice president of Affinity Partner Relations for CFS Affinity Services. "The interest savings for most will likely outweigh the downside, which is the loss of the six-month grace period. We are pleased that we have this opportunity to assist student borrowers with the in-school consolidation option."

Students can visit the Student Loan Consolidation Program at for more information or call 866-311-8076 to discuss consolidation options with a loan counselor.

About CFS Affinity Services

CFS Affinity Services, a division of Collegiate Funding Services, is the leading provider of affinity benefits and services in education finance among alumni and professional associations, including the Student Loan Consolidation Program and the Alumni Loan Consolidation Program. CFS Affinity Services provides private-label and co-branded education finance products that enable members of leading alumni and professional associations to pay for and manage the cost of a college education. For additional information, visit

About Collegiate Funding Services

Collegiate Funding Services is a leading education finance company dedicated to providing students and their families with the practical advice and loan solutions they need to help manage and pay for the cost of higher education. Collegiate Funding Services also offers a comprehensive portfolio of education loan products and services -- including loan origination, loan servicing, and campus-based scholarship and affinity marketing tools -- to the higher education community. As of March 31, 2005, Collegiate Funding Services had facilitated the origination of more than $19 billion in education loans. At March 31, 2005, the company managed more than $11 billion in student loans for more than 445,000 borrowers. For additional information, visit or call 1-888-423-7562.

(C) Copyright 2005 CFS Affinity Services & Collegiate Presswire. All Rights Reserved.

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