June 24, 2008 Barry Armstrong on new student loan rates Play video

(NECN) - New student loan rates are going into effect one week from Tuesday. Analysts are expecting some big drops that could save you and your loved ones a lot of money.

Breaking it all down for us is Barry Armstrong, financial advisor for Securities America and host of Money Matters on WBIX.

Why all of the fuss about student loan rates?

The rates are based on the treasury auctions, and they are established with a July 1st rate. Thanks to the Federal reserve, interest rates were much lower this past spring, and it is going to save graduates a lot of money going forward.

Give us an example, lets say you have a Stafford loan that is in its grace period?

If that Stafford loan was disbursed prior to July 1st 2006 your rate will drop from 6.62% all the way down to 3.6%

What if you have a Stafford loan that you are currently making payments on?

You need to wait until July 1st, but your rate will be reduced, from 7.22% all the way down to 4.21%

What about the Parent plus loans?

The rates on these loans had gotten as high as 8.02%, and they can now get a reduced rate of only 501%.

What should holders of these loans be doing right now?

Get organized, make sure you are caught up on your payments, and be ready to contact your lender next week. You might want to consider a consolidation, which you are only allowed to do once, but clearly you are going to save some money