Experts say now is the time to refinance student loans

By Chad Livengood
Daily Telegram Staff Writer

ADRIAN -- There's never been a better opportunity to refinance and consolidate federally guaranteed college loans, financial aid officials say.

Students can lock in a fixed rate of 2.77 percent while still enrolled in school, and graduates can refinance their aging college loans for 3.37 percent, effective July 1.

"It's not that the rates are cheaper to refinance them, but that you can lock in a fixed rate," said Michael Hague, associate vice president for student financial services at Adrian College.

Past and present college students can qualify for the new rates if they have borrowed from the Federal Stafford loan, Federal Direct Student Loan Program and Family Federal Education Loan programs. The rates do not apply the Federal Perkins Loan Program, which currently carries a fixed rate of 5 percent for repayment.

The new rates, which legally cannot exceed 8.25 percent, are a 35-year-low, according to the U.S. Department of Education.

Congress is debating reauthorizing the fixed rates or using variable rates, said Tom Freeland, a communications manager for the office of scholarships and grants in the Michigan Department of Treasury.

"Students are consolidating their loans because they can get a lower rate ... the debate is, 'Is that fair?' " Freeland said. "Should the feds spend that money on such a low interest rate for students who are out of school, or should they spend that money for more grants for students who are still in school?"

The problem is, fixed rates are costing the federal government too much, Hague said.

Because of the uncertainty of the future of fixed rates, Hague and other college financial aid officials are urging student and graduates to take advantage of these rate offers while they last.

If one refinances their college loans with the new "locked-in" rates, they lose consolidation opportunities if they were to go back to school, Hague said.

"Once you lock them in, you can't redo it," he said.


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