One little-noticed aspect of the recently passed Deficit Reduction Act is a provision that changes Stafford loans from variable rates to a fixed rate of a little under 7%. The Government likes this change because it makes loan interest predictable. In the long term, students will like it as interest rates get higher.
In the short term, though, this shift is bad news for borrowers who have enjoyed exceptionally low rates. My advice to borrowers? Consolidate now and lock in a fixed rate that will still be a bit lower than the new rate. Once the changes take effect in July 2006, consolidation will just create one account number without impacting interest rates.
Yet even with these changes, the Stafford loan program remains an exceptionally good deal for Americans. Sure, there's a case to be made that debt is never a good thing, but in the United States, we all too willingly embrace debt. And as far as debts go, Stafford loans are among the best debts one could have: the rates are low, the interest is tax-deductible, and the terms are generous. If the choice comes down to a Stafford loan or a credit card, ditch the lousy t-shirt and borrow from the Government.
Long live the Stafford!
Article Source: http://www.articledashboard.com
James C. Samans, CISSP-ISSEP, CISA, is a twenty-something speaker and freelance writer who promotes the importance of financial planning for young professionals and recent graduates. He may be reached by email at james.samans@gmail.com.