Congressman Al Green Urges Students to Consolidate Loans by July 1

Jun 13, 2006 Issues: Financial Services

(Houston, TX)--Congressman Al Green (TX-09) today urged students and parents to consolidate federal student loans before July 1, 2006, when interest rates on outstanding loans are expected to rise to the highest rate in six years.  Consolidation enables students and parents to combine their separate loans into one loan and lock in a low fixed interest rate, saving borrowers thousands of dollars over the life of their loans.

"Loan consolidation is a critical tool for enabling students and parents to reduce education debt," Congressman Al Green said.  "Borrowers have only a few weeks left to consolidate their loans before interest rates rise again, and I strongly encourage them to take advantage of this opportunity to potentially save thousands of dollars throughout the duration of their loans."

Each year on July 1, the U.S. Department of Education adjusts the interest rates on outstanding college loans.  Interest rates on student loans are expected to rise to just over 7 percent and interest rates on parent loans are expected to rise to 7.8 percent.  Student borrowers who consolidate their outstanding loans before July 1 would be eligible to lock in an interest rate as low as 4.75 percent, which would save an average of nearly $3,500 over the life of the loans.  Parent borrowers who consolidate before July 1 would be eligible to lock in a rate as low as 6.1 percent over the life of their loan.

Students and parents who have taken out at least one loan through the federal government's Federal Family Education Loan (FFEL), Direct Loan or Perkins Loan programs may be eligible for loan consolidation.  Borrowers who have direct loans through the Department of Education can call 1-800-557-7392 or apply on-line for consolidation at https://www.loanconsolidation.ed.gov.  Borrowers who have loans through the FFEL bank-based loan program should contact the company that services the loan.

Congressman Al Green is also a co-sponsor of H.R. 5150, the Reverse the Raid on Student Aid Act, a bill that would cut interest rates in half for borrowers in most need on subsidized student loans and on parent loans for undergraduates.  Under the bill, the typical undergraduate student borrower, with $17,500 in debt, would save $5,600 over the life of a loan.  Since 2001, tuition and fees at four-year public college have increased by 40 percent.  The typical student borrower now graduates from college with a record $17,500 in education debt.