Rates on Federal Student Loans Expected to Fall to 37 Year Low According to Collegiate Funding Services; Consolidating Eligible Federal Student Loans Can Cut Monthly Payments by up to 56%

Business Wire, May 7, 2003

Business Editors/Education Writers

FREDERICKSBURG, Va.--(BUSINESS WIRE)--May 7, 2003

Collegiate Funding Services, LLC (CFS), a leading education services company, anticipates that interest rates on federal student loans will likely fall to the lowest level in the 37 year history of the federal student loan program when the annual rate adjustment takes effect on July 1.

The new variable rate for Stafford loans -- which is tied to the final auction of the 91-day U.S. Treasury bills in May - could fall to an unprecedented 2.8% for in-school grace borrowers, and 3.4% for those in repayment.

Federal student loan borrowers can further benefit from the new historically low rates by consolidating their existing variable rate federal loans into a single fixed interest rate loan through the Federal Consolidation Loan Program.

"In addition to fixing the interest rate for the life of the loan, consolidation of eligible federal student loans can mean a reduction in monthly payments of up to 56% -- possibly more, once the rate change takes effect," said J. Barry Morrow, Chief Executive Officer of CFS.

He goes on to say that consolidation gives graduates more freedom to manage their overall debt burden, possibly reallocating the money toward other things, such as paying off high-interest credit card debt.

"It costs the borrower nothing to consolidate, there is no pre-payment penalty, and student loan interest may be tax deductible," says Mr. Morrow. "Consolidation is a smart and practical move, given ever increasing student loan debt and a challenging employment outlook faced by many graduates."

According to Mr. Morrow, student loan borrowers need not wait to apply for consolidation until after July 1 when the Department of Education adjusts the rates for federal student loans. As in years past, CFS has monitored economic conditions over the months prior to the rate change to determine if applicants will get the best rate by consolidating before or after July 1.

When rates are expected to go down, as they are this year, CFS holds applications until after the rate change takes effect to ensure customers receive the best possible rate. This year, CFS has been holding applications since May 1.

"With the expected July 1 rate drop, those who consolidate before the end of their 'grace period' could lock-in rates below 3.0%," Mr. Morrow said. "For those who are currently in repayment, the interest rate on their consolidated loan could be as low as 3.5%."

A borrower's "grace period" is the six- to nine-month period, typically following graduation, before they must begin paying back their student loans. Borrowers who consolidate within this time frame can lock-in on a lower interest rate - up to 0.6% lower - than if they wait to consolidate once their loans enter repayment.

As an added benefit, CFS defers funding of applicants' accounts until the end of their grace period so that they can lock-in the lower interest rate and still take full advantage of their "payment free" period. Recent graduates need to be aware of this important benefit when considering consolidation, and can ask a CFS financial specialist for details.

The opportunity to lock-in on historically low interest rates is a strong incentive for borrowers to act quickly. Additionally, borrowers who consolidate with CFS can reduce their interest rates even further up to an additional 1.25% -- by making their first 36 consecutive monthly payments on time, and having their payments automatically debited from their bank account.

About CFS

Collegiate Funding Services is a leading nationwide provider of products and services that address a full-range of education finance and debt management needs. CFS has helped over a quarter million customers create and customize student loan repayment plans that suit their budget and financial goals. All lenders in the CFS Consolidation Loan Program are Equal Opportunity Lenders.

Headquartered in Fredericksburg, Va., and with satellite operations in Pinellas Park, Fla., as well as a wholly-owned servicing subsidiary in Ridgeland, Miss., CFS now employs approximately 1,100 individuals.

For additional information, visit www.cfsloans.com or call 1-888-423-7562.