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The interest rates on older variable-rate federal education loans will be dropping to new historic lows on July 1, 2009. This will save borrowers who wait until July 1, 2009 to consolidate variable rate loans thousands of dollars of interest over the life of their loans.

Variable vs. Fixed Rate Loans

Federal Stafford and PLUS loans fall into two groups:

1. Loans originated before July 1, 2006 have variable interest rates that reset each July 1 based on the last 91-day T-Bill rate auction in May. They continue resetting each July 1 until the borrower chooses to lock in the rate by consolidating the loans. The interest rates on these loans will be dropping to new historic lows on July 1, 2009.
2. Loans originated on or after July 1, 2006 have fixed interest rates. The unsubsidized Stafford Loan has a 6.8% interest rate. The PLUS loan has an interest rate of 7.9% (Direct Loan program schools) or 8.5% (FFEL program schools). The interest rate on the subsidized Stafford loan for undergraduate students is also fixed, but each year new loans are at a different rate because of a phased-in interest rate reduction passed by the College Cost Reduction and Access Act of 2007. The interest rate in 2008-09 was 6.0% and the interest rate in 2009-10 (for new loans starting July 1, 2009) will be 5.6%, followed by 4.5%, then 3.4%, and then reverting to 6.8% if the change isn’t extended by Congress. Subsidized Stafford loans for graduate students remain at 6.8%.

Locking in the New Variable Interest Rates

The last 91-day T-bill rate auction in May occurred on May 26, 2009 with an investment rate of 0.178%, yielding the following new variable rates that go into effect on July 1, 2009:

• Stafford Loan (In-School/Grace Period): 1.88%
• Stafford Loan (Repayment Period): 2.48%
• PLUS Loan: 3.28%

These rates are 1.727% lower than the interest rates in effect in 2008-09, and are the lowest interest rates in the history of the federal student loan program. The previous low was in 2004-05 when in-school/grace period rates on the Stafford loan hit 2.77%.

Borrowers can lock in the current applicable rate on variable-rate loans by consolidating them. The interest rate on a consolidation loan is a fixed rate that is the weighted average of the current applicable interest rates on the loans being consolidated, rounded up to the nearest 1/8th of a point and capped at 8.25%.

Thus borrowers with variable rate loans who consolidate them after July 1, 2009 will obtain the following consolidation loan interest rates:

• Stafford Loan Consolidation (In-School/Grace Period): 2.00%
• Stafford Loan Consolidation (Repayment Period): 2.50%
• PLUS Loan Consolidation: 3.38%

Bottom Line Advice

Borrowers who still have variable rate loans should wait until July 1, 2009 to consolidate their loans.

Potential Savings

Borrowers who wait until July 1, 2009 to consolidate variable rate loans will save thousands of dollars in interest over the life of their loans.

For example, compare the cost of a $20,000 Stafford loan with a 6.8% interest rate (the current fixed rate and also the historical average interest rate) with the cost of a variable rate Stafford loan with the interest rate locked in at 2.0%. The monthly payment on the 2.0% rate loan over a standard 10-year repayment term is $184 and the total interest paid over the life of the loan is $2,083, compared with $230 and $7,619 on a 6.8% rate loan. This represents a 20% lower monthly payment and total interest savings of $5,536 (73%). Over an extended 20-year repayment term the monthly payment on the 2.0% rate loan is $101 and the total interest paid is $4,282 compared with $153 and $16,640 on the 6.8% rate loan. That represents a one-third (33%) lower monthly payment and total interest savings of $12,358 (74%).

Compared with consolidating at the current grace period rate of 3.635%, the savings are still substantial. A borrower with $20,000 in variable-rate debt who waits until July 1, 2009 to consolidate will save $1,790 (46%) in interest over the life of a 10-year loan and $3,865 (47%) in interest over the life of a 20-year loan and will benefit from a $15 to $16 reduction in the monthly payment.

How to Consolidate Your Loans

Since most federally-guaranteed student loan program lenders are no longer consolidating federal education loans, borrowers who wish to consolidate their loans should use the Federal Direct Loan Consolidation program at loanconsolidation.ed.gov.

Exceptions and Caveats

Borrowers who have already consolidated their loans cannot take advantage of the drop in interest rates, as it is not possible to relock the rates after the loans have been consolidated.  Borrowers with loans originated after July 1, 2006 are not eligible for the new lower rates, as these rates are only available to borrowers with varaible rate loans. Private student loans cannot be included in a federal consolidation loan. Borrowers who are still in school cannot consolidate their loans until they graduate, as Congress repealed the early repayment status loophole in 2006.

Borrowers who received prompt payment discounts from their lender will lose those discounts if they consolidate. Borrowers who received up-front discounts on their loans, such as fee waivers, may lose those discounts if they consolidate, depending on the terms of the discounts. However, generally the savings associated with locking in the loans at historically low interest rates will outweigh the value of the lost discounts.

It is not advisable to include Perkins loans in a consolidation loan, as one loses the subsidized interest and favorable forgiveness benefits associated with a Perkins loan if the loan is consolidated. Also, since the interest rate on the Perkins loan is already fixed, there is no financial benefit to consolidating them.

Likewise, there is no financial benefit to including fixed-rate federal education loans in with variable rate loans in a consolidation loan (other than possibly masking a portion of the 1/8th of a point round-up, depending on the loan balances). However, to the extent that the weighted average preserves the underlying cost of the loans, there is also little harm in including fixed rate Stafford and PLUS loans in with variable rate loans in a consolidation loan. Borrowers may wish to consolidate the loans together to simplify the repayment process.

There is no requirement that a borrower who consolidates his or her loans switch from standard ten-year repayment to a longer repayment plan, such as extended repayment or the new income-based repayment plan. Some borrowers may choose to use extended repayment to maximize the term of the historically low interest rate. However, if they do so, they should use the reduction in the monthly payment to pay down more expensive debt. Otherwise they are merely increasing the amount of interest they will pay over the life of the loan.

President Obama has called for colleges and universities across the country to come up with cost-effective ways to properly educate students. One solution: three-year degree programs. Though three-year degree programs aren’t necessarily an educational phenomenon, they are becoming more available to motivated, ambitious students.

Since the foundation of American universities, a four-year degree program has been the standard. It allows students to get the general education they need in the first few years and continue the remaining two specializing in a particular area. However, proponents of three-year degree programs claim that a student can do the same in three years as well. In fact, this model has been working at University of Cambridge and Oxford University in England for quite some time.

Rhode Island lawmakers recently passed a bill requiring all state institutions to provide three-year degree programs by 2010. All eyes will be on Rhode Island as they make this change, particularly other lawmakers. “It will not be easy to produce a low-cost, high-quality three-year curriculum for a college degree, but now is the time to try,” said Sen. Lamar Alexander (R-Tenn.), a former education secretary and a past president of the University of Tennessee.

Not only will a three-year degree program save students time but money as well. The average college student would save one-fourth of the cost of a four-year degree program by opting for three-years instead. This would be extremely helpful to the 55% of teens who were surveyed by the Junior Achievement and the Allstate Foundation and said that the economy had changed their college plans.

Could three-year degree programs be the solution to worried high school students searching for higher education options? Maybe so. However, it could be costly to those students that enter a three-year degree program without a concise idea of what they want academically and vocationally. There is no room for major changes.

Three-year degree programs may work for students who know exactly what they want from their education and have a concrete plan upon graduation. But what about the students who need more time to decide on a major and career path? The most recent statistics from the Education Department reveal that in 2001 4.2% of U.S. students completed a bachelor’s degree in three years, 57.3% in four, and 38.5% in five or more.

Additionally, not all students seek a college experience that is solely academic. Most students, when looking at a college, consider other facets: social networking and life lessons. Many students need four years to figure out what they want to do with their lives, establish and maintain relationships, and develop networking ties that will be beneficial to them in the real world.

Across the country, families are scaling back in a big way: driving fuel-efficient cars, buying generic brand groceries, and canceling summer vacations. Families have to financially prioritize now more than ever. But there is one financial constraint that is getting more preferential treatment over the rest.

Country Financial released new survey data on whether parents regarded their 401K or child’s college tuition as the greater financial priority. Of the 1,241 parents surveyed, 47% claimed that college tuition was more important than retirement savings while 41% put their 401K first. Though the margin seems slim, 61% of those surveyed said that the recession was not going to inhibit their child’s plans for a college education.

Mary Pilon, a blogger for the Wall Street Journal, is surprised that so many families are not letting the economy influence their plans for higher education. “Considering all of the belt-tightening — both from families and financial-aid offices strained by anemic endowments…this is particularly astonishing. In spite of one of the worst economies in generations, parents say they’re still willing to shell out a lot for college education,” says Pilon.

Last year’s survey data indicated otherwise—that financing retirement savings were more important than college tuition. However, it’s not completely surprising. Of those surveyed, 79% believe that a higher education is one of the best investments one can make. Perhaps the tough economic times have provided a different perspective.

Though parents may still be willing to make that investment, their preferences may have shifted. Parents are more likely to encourage their children to attend a public school or commute from home in tough economic times. Essentially, the economy may not change whether or not parents will shell out for college tuition but rather, under what circumstances they will do so.

Uh-oh, it’s May 6^th…and you still haven’t made your final college decision. Maybe you got rejected from your first choice college, which is pretty common after the record high rejection rates this admissions season. Or maybe your first choice college ran out of space. Time to panic, right?

Yesterday, the National Association for College Admissions Counseling (NACAC) released their annual survey of four-year colleges and universities across the country that still have room. “It is important for students and their counselors to know that many quality institutions still have both space and financial aid available for those who have not yet completed the college admission and enrollment process,” said Joyce Smith, NACAC’s Chief Executive Officer.

At least 258 schools have spaces to fill and 256 of those institutions are still offering financial aid. Of the 258, all of them have room for freshmen while 247 still have transfer space available. Finally, 249 of the open institutions have housing available to incoming students. Roughly 71% of the schools are private while the rest are public.

Last year, a total of 295 institutions had vacancies after May 1^st, which is counterintuitive to the challenge that the economy may have posed to college applicants. However, it should be noted that NACAC only surveys its members, which consist of 1,150 out of the nation’s 2,000 colleges.

Students interested in a vacant spot at one of the 258 schools are encouraged to contact that particular school directly.

Let’s be perfectly frank about something—online schools have a shady reputation. They aren’t considered a “real college” because they lack real classrooms, dorms, and libraries. Also, a real, living, breathing university is going to go farther on a resume than an internet education. But “real” colleges and universities across the country are starting to offer online degree programs. Yes, you can finally earn your degree in your pajamas without the embarrassment of attending an online college.

Online degrees from colleges and universities allow students to get the education they want without having to uproot themselves from their current city or living room. Students are also saving themselves a great deal of money by completing an online degree as well. For instance, Carnegie Mellon’s Tepper School of Business, which is ranked 15^th in the nation according to U.S. News and World Report, offers an online MBA for half the cost of a full-time MBA.

University of North Carolina now offers over 1,000 online courses and 170 online degree programs for students, working adults, and other nontraditional students. As of 2007, 35 of the programs were for baccalaureate completion, 55 were masters, and 2 were doctoral programs. Online UNC students get the same education as those who are physically on campus. The materials, faculty, and degrees are the exact same; and once a student graduates, he or she is presented with a UNC degree without any indication that the degree was earned online.

Other universities offering online courses and degree programs are Illinois University, University of Massachusetts, and Penn State University. Not too shabby, right? In this economy, an online degree from an accredited college or university isn’t a bad idea. And now, you no longer have to forego your higher education because of outrageous costs or lack of respected reputation.

Did you spend your spring break in Mexico? If so, you may have brought home an unwarranted guest: swine flu. At least eight students at St. Francis Preparatory School in Queens, New York have been infected with the flu, all of whom spent their spring breaks in Cancun, Mexico.

Unfortunately, swine flu differs from other types of epidemic influenza. Rather than targeting weaker immune systems found in young children and senior citizens, swine flu has no limits. In fact, most of those who have died from the flu in Mexico have been young, healthy adults.

Also, swine flu is contracted from person to person rather than from food to person, making schools and colleges especially susceptible to outbreaks. For instance, at St. Francis Preparatory School, the few students that brought back swine flu had infected over 100 of their classmates by last Friday. The Center for Disease Control predicts that because of the easy transmission of swine flu, cases will only increase in the United States.

Symptoms of swine flu are similar to the common flu. They include fever, lethargy, lack of appetite, coughing, runny nose, sore throat, nausea, vomiting and diarrhea. If you are experiencing any of these systems, see your school nurse, doctor, or campus health center immediately.

To prevent swine flu, follow these simple instructions from the Center for Disease Control (CDC): “First and most important: wash your hands. Try to stay in good general health. Get plenty of sleep, be physically active, manage your stress, drink plenty of fluids, and eat nutritious food. Try not touch surfaces that may be contaminated with the flu virus. Avoid close contact with people who are sick.”

As of March 2009, the Bureau of Labor Statistics reported that the unemployment rate for people age 20 – 24 was 13.9%. That’s 5.4% higher than the national average, and 3.7% higher than last year. This will be the toughest job market college graduates have faced in decades.

The old saying goes that searching for a job is a job in itself. If that’s the case, then college graduates should be prepared to put in a few extra hours with these helpful tips:

1. Post your resume on Monster.com. This should be the first place to start with any job search, regardless of the economic climate. It’s no longer simply a convenient place to virtually post your resume. The new Monster also has interactive job-seeker tools like resume writing services, interviewing workshops, career mapping, and salary wizards to help you get your footing.
2. Visit your campus career center. Your career center on campus has probably become the most popular building in recent months. Campus career centers have great resources for job searching students like alumni contacts, industry databases, and resume or interview workshops.
3. Make due with an internship. The recession has revolutionized internships. You may not get paid, but you’ll be getting experience, which will pay off big time when the economy is back on its feet.
4. Get a job with a temp agency. Temping opportunities pay and provide workers with experience. Some temping agencies even provide employees with 401K, medical, and vacation benefits. If you find a temping experience that you enjoy, it could potentially turn into a full-time job.
5. Market yourself. Remember reading to third graders one afternoon your sophomore year? Or how about that Saturday during junior year when you helped build a house for Habitat for Humanity? Alone, these details seem insignificant but combined to a figure or 200+ hours of community service gets you noticed. You don’t have corporate skills to tout so utilize your study abroad, leadership, volunteer, and internship experiences.

As a college student, you are by now a master procrastinator. Each day, you spend countless hours Facebooking, watching Game Show Network, and napping to avoid writing that six-page paper due tomorrow. But the stark reality is that the age of procrastination lasts only four years.

Though it would be ridiculous to start submitting resumes your freshmen year, there are steps you can take throughout college to prepare for work in the “real world.”

Freshmen Year

Find out what you’re good at and also use this year to explore:

• Think outside of the box—take course that you normally wouldn’t take.
• Ask family and friends about their career choices.
• Take career interest tests at your school’s career center.

Sophomore Year

Declaring your major oftentimes leads to identifying your eventual career:

• Research majors that intrigue you.
• Get a part-time job, internship, or volunteer in career fields that interest you.

Junior Year

It’s time to gain some experience:

• Develop your resume and cover letter—a great resource for help is your school’s career center.
• Attend job fairs and start networking.
• Get an internship, summer job, co-op in your major or career field.

Senior Year

Obviously, it’s time to start job searching:

• Put the final touches on your resume and cover letter.
• Practice interviewing at your school’s career center.
• Research companies, send in your resume, and prepare for interviews!

As the working world becomes more reliant on technology and expects it’s works to have deep knowledge of their profession, the debate has been raging over whether majoring in a liberal arts discipline, like English or History, is career poison.

According to Inside Higher Education, there are only 95 ‘true’ liberal arts colleges left. That is, colleges who strictly have non career-based majors with no graduate schools.

This debate has been ongoing since majors like business administration and finance have been replacing traditionally liberal-arts majors like economics. These majors are seen to be more practical and catered towards working rather than being merely theoretical. Therefore, these ‘pre-professional’ majors are thought of being better at educating students for careers.

The real question is what you want out of a college education. Today, college is seen as a necessary stepping-stone towards a material goal: a well-paying job. Having career-oriented majors then gives the student the necessary skills for the career they want. It’s a very concentrated and focused path that gives students practical, real-world knowledge.

Liberal Arts education steeps a student in a traditional ‘great books’ education. Students studying politics, for instance, would read philosophers like Marx, Hobbes, and Locke, along with learning modern theory. A liberal arts education also includes a core curriculum that requires student to take courses in math, science, humanities, and social science regardless of major. Moreover, a strong emphasis on writing and participation is encouraged by small class size in liberal arts colleges.

In the end, a liberal arts education prepares you to be well-rounded enough to tackle a career that may not be related to your major, while career majors ready you for a specific profession with a deep set of skills liberal arts majors may not have.

In education, the path you take is ultimately the right one for you, even if you didn’t realize it in the first place.

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Every resume you send out should always be accompanied by a cover letter. The problem is what should you say in a cover letter that isn’t said in your resume? Cover letters should be short, never over one page, with 3-4 short paragraphs. What should be in a cover letter? The paragraphs should breakdown thusly:

Paragraph 1: What the position and company means to you.

Roughly, the first paragraph should state the position you’re applying for and why you’re so excited about it. Write how the position matches your interests and career goals and how your background makes you a good candidate. The first paragraph should also state why you want to work for this company. Research the company well, and write what genuinely interests you in the company in your cover letter. That way, the company knows you did your research and took time rather than sending out a generic cover letter.

Paragraph 2: What you bring to the company.

Perhaps the most important paragraph, you need to convey what you will bring to the company. If you’re new to the job market, cull from your internship experiences and positions in campus organizations. Were you an editor for a publication? You led a group of people, work on a deadline, and managed a budget to boot. What an employer wants to know is how you’ll bring these skills to the position and how you can benefit the company.

Paragraph 3: Get in touch.

The last paragraph should show that you are taking initiative. Tell them that you will call them in a week to follow up on your resume. If the ad says “no phone calls,” leave them your contact information. Thank them for their time and consideration.