Many students are uneasy about borrowing, with good reason. The U.S. Education Department says 7% of borrowers default within two years of beginning repayment on loans that can stretch for a decade or more. Average student loan debt tops $23,000.
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Many students are uneasy about borrowing, with good reason. The U.S. Education Department says 7% of borrowers default within two years of beginning repayment on loans that can stretch for a decade or more. Average student loan debt tops $23,000.
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US News & World Report released a list of Colleges that have High Student Loan Repayment Rates

Student Loan Debt Clock at FinAid.org gives a continually updated estimate of current outstanding federal and private student loan debt. A recent report showed that student loan debt outstanding had surpassed total credit card loan debt outstanding.

From The Detroit Free Press

Students, lock in low loan rates
Wait for July 1, but study offers carefully

BY SUSAN TOMPOR • FREE PRESS COLUMNIST • June 11, 2008

College students who rush from one thing to the next should relax the next few weeks when it comes to consolidating student loans.
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You'll want to consolidate July 1 or after to lock in low fixed rates.

Given the credit crunch, you won't see an onslaught of lenders urging you to consolidate. So you have to hustle on your own.

If you're graduating with a bachelor's degree this spring, you might want to consolidate loans taken out as a freshman or sophomore as a way to lock in low fixed rates.
Rates among the best ever

What kind of a rate would you get by waiting?

"They're among the best rates ever," said Mark Kantrowitz, publisher of FinAid.org.

You would lock in a rate of 3.625% if you are in college or if you are a graduate who consolidates during the grace period, a 6-month window after graduation before loans must start being repaid.

That's down from 6.62%.

And if you're already in the repayment period and have not yet consolidated, you could lock in a rate of 4.25% on a Stafford loan.

Students who are already repaying variable-rate Stafford loans are paying 7.22%. Parents with PLUS loans that have a variable rate could lock in a rate of 5.125% on July 1 or after. That would be down from 8.02% now.

You can consolidate variable-rate Stafford and PLUS loans disbursed before July 1, 2006, but you can only consolidate loans that have not yet been consolidated.

Many students also have federal loans issued after July 1, 2006, and those loans already have a fixed rate. The fixed rate for unsubsidized Stafford loans, the most popular federal student loans, is 6.8%. You cannot consolidate those loans to get lower rates.
Lenders cool on consolidations

Al Hermsen, director of student financial aid at Wayne State University, said his office hasn't seen many students ask about loan consolidations this year, as they have in other years.

Loan consolidations aren't a hot product.

Sallie Mae, the nation's largest student-loan lender, announced in April that it would stop offering federal consolidation loans. All top 10 lenders that consolidated student loans no longer offer those loans, either.

Hermsen, who has two children who graduated from college this year, said he's still seeing consolidation offers pop up in the mail at his house. But he said some look like official notices from the government, and they aren't. So students should study any offers they get carefully.

One legitimate option is the Federal Direct Loan program (www.loanconsolidation.ed.gov). You can consolidate with the program, even if your school did not participate in it.
What happens if you forget

If you do nothing, of course, the interest rates on your variable-rate student loans would drop anyway July 1. But you'd get that rate for only one year. Given the concerns about inflation, it's possible that rates could go up in the future.

It could be savvy to take advantage of this huge drop in rates and lock in something low July 1 or after.

A letter was sent out by Education Secretary Margaret Spellings to lenders explaining that the government will purchase some of the student loans, freeing more money up for the issuerers to lend money.

Under the plan, lenders will have the option of selling the government securities backed by student loans on terms markedly more favorable than the rates now available in the financial markets.

In case the offer fails to keep enough private lenders in the system, the Education Department is increasing its ability to issue and service loans directly, Spellings wrote. She added that the department is also prepared to advance money to agencies that would act as lenders of last resort.

Although many lenders have stopped issuing government-backed loans, Bank of America, last month reaffirmed its commitment to issuing federally backed loans. It said it would no longer issue strictly private student loans.

May 15 (Bloomberg) -- Nelnet Inc. sold $1.35 billion of bonds backed by student loans, paying the lowest relative yields this year, in a sign that investor demand for the debt may be returning.
The Lincoln, Nebraska-based student-loan provider issued three-year bonds rated AAA that priced to yield 70 basis points more than the three-month London interbank offered rate, said a person familiar with today's sale, who declined to be identified because the terms aren't public. That's a narrower spread than the 105 basis points Nelnet was charged last month, and the 100 basis points the company offered on March 31.
The Nelnet sale adds to evidence that credit markets may be thawing after the collapse of subprime mortgages spawned $342.4 billion in writedowns and credit losses at financial firms worldwide. Government-guaranteed student-loan debt spreads narrowed about 5 basis points to 95 basis points last week, according to JPMorgan Chase & Co. High-yield bonds had the busiest week for new issues since November last week and borrowers sold $4.4 billion of auto-loan bonds in the past month.

``There appears to be more renewed investor interest,'' said Gary Santo, a managing director of consumer asset-backed securities at Fitch Ratings in New York. ``Investors seem to be differentiating risk across assets, which can only be a good thing for government-guaranteed collateral.''

Nelnet rose 44 cents, or 3.3 percent, to $13.66 in New York Stock Exchange composite trading. The shares have fallen 45 percent in the past year.

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