ISAC Encourages Students to Consider Loan Consolidation

SPRINGFIELD – The Illinois Student Assistance Commission (ISAC) is encouraging college students, recent graduates, and parents who have borrowed education loans to consider consolidating loans before July 1 in order to lock in a record-low interest rate.  As of July 1, 2005, interest rates for variable-rate student and parent loans will increase by nearly 2 percent.  Borrowers who act before July 1 to lock in lower interest rates could save more than $1,000 per $10,000 in loans paid over ten years.Student loans generally have a variable interest rate, which allows the interest rate to rise or fall on an annual basis.  Borrowers can refinance all their loans into one single loan through a process called consolidation, thereby moving from an adjustable rate to a fixed rate.   However, borrowers must request a consolidation loan before July 1, 2005 to avoid higher interest rates.

“ISAC is committed to helping students take advantage of the lowest interest rates possible on their student loans.  Our own state loan consolidation program offers one of the most generous borrower benefit programs nationwide, but the critical point is that students and parents must act now before interest rates climb,” explained Larry E. Matejka, ISAC’s Executive Director.

Borrowers who have recently left school can consolidate their loans, even if they have just one student loan.  Borrowers who are still in school can consolidate their loans, as well, to take advantage of the lower interest rates, but they must forfeit the six-month grace period after they graduate and instead will need to begin repayment within two months of leaving school.  Students with unsubsidized education loans in particular should consider consolidating loans while they are still attending college because the interest that accumulates on an unsubsidized loan while the student is in school will accrue at the lower fixed rate rather than a variable rate.  However, students should consult a financial aid administrator to discuss the advantages and disadvantages of in-school loan consolidation.

To learn more about the consolidation process, students and parents should contact the lender of the education loan.  If a student has borrowed loans from more than one lender, then he or she can choose any lender with whom to consolidate his or her loans. 

The State of Illinois offers a loan consolidation program through the Illinois Student Assistance Commission.  The Illinois Designated Account Purchase Program, administered through ISAC, can help borrowers refinance their student loans while offering generous borrower benefits.  For example, borrowers can further reduce their interest rates simply by having payments automatically deducted from a checking or savings account.  Borrowers also earn lower interest rates through timely loan payments.  In fact, a borrower who consolidates his loan with IDAPP could cut his already-low student loan interest rate by another 1 percent after 36 consecutive, on-time monthly payments.

For more information, students and parents can call ISAC toll-free at 800-366-5755 and speak with a Loan Consolidation Expert.  Information is also available at ISAC’s college planning and financing Web site, collegezone.com, by clicking on the IDAPP link. 

About ISAC
The Illinois Student Assistance Commission is the State’s centralized provider of financial assistance aimed at helping students and families access postsecondary education and/or training. Each year, the Commission awards an estimated $400 million in scholarship and grant aid to nearly 185,000 qualified students, and also provides an additional $740 million to borrowers through its student loan programs. The agency offers credit-based alternative loans, a 529 prepaid tuition program known as College Illinois!, and a broad array of outreach and informational services to ensure that families have access to the information they need to pay for a college education. More information is available by calling toll-free 800.899.ISAC (4722) or visiting the agency’s Web site at www.collegezone.com.