Student Loan Rates To Rise

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WASHINGTON - (05/27/05) -- Credit unions, banks and otherstudent lenders can expect a brisk business over the next month instudent loan consolidations as college graduates face the greatestinterest hike in the guaranteed loan program's 40-year history onJuly 1. The rates on federal variable-rate loans, such as Staffordor PLUS loans for parents with student dependents, are expected torise by as much as 2.5% (250 basis points) form their currentall-time lows on that day. The rates are expected to rise becausethe rates are tied to U.S. T-bill yields every July and the T-billrate has gone up by 2% with the rise in short-term rates. Butstudents and their parents can avoid the higher rates byconsolidating their loans at lower fixed rates beforethen.

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