Beginning July 1, 2006 student loans with variable interest rates will riseby nearly 2-percentage points. Depending on the loan status, a Staffordloan currently having a low, variable rate of 4.7% or 5.3% will increase toa new variable rate of 6.54% and 7.14%. Parent PLUS loans with a currentvariable rate of 6.1% will increase to a new variable rate of 7.94%. Newloans issued on or after July 1, 2006, will carry fixed interest rates of6.8% for Stafford loans and 8.5% for PLUS loans.

The new rates are a result of the Higher Education Reconciliation Act(HERA) signed into law by President Bush on February 8, 2006. In additionto higher interest rates, HERA will prohibit students who are currently inschool from consolidating their student loans effective July 1, 2006.

"We have seen an increase in student loan consolidation activity and weanticipate a rush between now and midnight June 30th," said MariMann-Silva, vice-president of Financial Operations of the not-for-profitCouncil for South Texas Economic Progress (COSTEP). "Loan consolidationincentives along with the July 1, 2006 rate increase are driving themarket," Mann-Silva added. "COSTEP offers incentive plans based on loanamounts. The following is a recap of those incentives: Student loan amountsof $12,500 or greater will receive a 1% interest rate reduction at the timeof consolidation and an additional 1% interest rate reduction after 36 ontime payments; loan amounts that are between $5,000 and $12,499.99 willreceive a 1% interest rate reduction after 36 on time payments; all studentloans are eligible to receive a .25% incentive for participating with theSUREPAY(SM) program."

"The end result is that many students will be paying thousands of dollarsmore in interest rates unless they consolidate now," said Patricia Beard,president of COSTEP. "There is a window of opportunity but the window isclosing. You can still consolidate your student loans and obtain newstudent loans at the current rate as long as you submit the completedapplication before midnight, June 30, 2006."

Under HERA, spousal consolidation loans will no longer be available oncethe act goes into effect. The not-for-profit COSTEP will still be able tooffer incentive programs under the Department of Education guidelines,however, the new interest rates of July 1, 2006 will affect all new loansmade on or after July 1.

"The best thing that you can do as a student or parent is review yourstudent loans and call now for assistance to avoid the rush. What we fearmost is students having to drop out of college or students not going tocollege because of the increase in interest on student loans," added Beard.

Once the new federal policies go into effect, an in-school student canstill apply for additional loans. They will no longer be able toconsolidate their loans into one payment and the new loans will be at thehigher interest rate. COSTEP urges all students and parents with studentloans to review their rate and take advantage of the incentives offered bylenders.

The not-for-profit COSTEP has extended its hours to accommodate morestudents. Extended hours will be until 9:00 pm, June 26-29 and will keepits offices open until midnight June 30th.

For More Information Contact:Mari Mann-SilvaTelephone number: 1.800.949.6371 ext. 3329

SOURCE: COSTEP

Source: marketwire