Refinance before rates increase, group advises

YOUNGSTOWN -- The American Association of State Colleges and Universities is advising students or former students with outstanding variable-rate federal Stafford loans to consider refinancing before interest rates rise July 1.
Borrowers are allowed to consolidate only once, however, so if they have consolidated in the past at a higher interest rate, they are not eligible for this new lower rate, unless they return to school and take out additional loans.
The interest on variable-rate federal student loans will rise by nearly 2 percentage points July 1.
Current variable-rate loans carry around 6.1-percent interest rates.
Those eligible to refinance can lock in a fixed rate for the life of their loans. Most borrowers will be looking at a fixed interest rate of 5.38 percent. If they complete their refinancing applications while still in college or within six months of graduation, but before June 30, however, they can get an additional rate reduction down to 4.75 percent under the Direct Loan Consolidation Program.
Applicants can cut their rate by an additional 0.025 percent if they enroll in the automatic payment program.
Borrowers should question lenders offering to consolidate their loans regarding benefits they could lose. It may be to the borrower's advantage to leave certain loans out of the new consolidation loan, the AASCU said.