A rate hike is expected July 1 on variable interest rates,  which would mean an increase on federal student loan rates by as much as 2  percentage points. While student borrowers may be inclined to panic, they easily can consolidate their loans before the increase takes effect.

The interest rates on federal student loans change each year on July 1. Stafford loans then change according to the 91-day Treasury bill, while PLUS loans change according to the 1-year Treasury bill.

Short-term interest rates recently  were raised by 25 basis points. Federal funds have a new target rate of 5 percent.

Legislation Changed  Rules

The Deficit Reduction Act of 2005, S. 1932, was signed into  law Feb. 8 by President Bush and includes major cuts to the federal student loan program totaling $12.7 billion. In addition, the legislation included changes in rules and regulations along with the rate increases.

New rates as of yet are unknown, as information will be made  available May 30. However, expected increased rates include:

7.3 percent for Stafford loan  repayment made since July 1998

6.7 percent on in-school,  grace and deferments

8.1 percent rate on PLUS  loans

Save Money and Ease the Student Loan Burden

For those student borrowers who  want to get out from under the heavy burden of student loan debt, student  loan consolidation can be a wonderful option. By consolidating, or pulling together a variety of student loans, students are able to save money and make their lives simpler with one easy monthly payment instead of numerous monthly student loan bills.

Student loan borrowers can save as  much as 60 percent when they choose consolidation through NextStudent, Phoenix,  a premier education funding company. NextStudent offers in-school borrowers a 4.75 interest rate. The company also offers eligible borrowers a 2.75 percent rate with applied benefits including:

.60 percent savings for  students who consolidate after graduation

.25 percent reduction with  use of Auto Debit

1 percent additional  reduction when students make 36 consecutive on-time payments

With student loan consolidation borrowers can pull  themselves out from the heavy loan debt by extending their repayment terms,  which can save thousands in the long run. This can be of great help, especially to those student borrowers from low- and middle-income families under great pressure from the rising cost of college tuition. Additionally, the lower interest rate received through consolidation stays locked for the term of the loan. Borrowers easily can save money on their loans and use the savings for other important necessities.

With July 1 only a little more than six weeks away, student  borrowers still have time to take advantage of consolidation. The process is simple and will help to make more lives easier.

NextStudent  believes that getting an education is the best investment you can make, and it  is dedicated to helping you pursue your education dreams by making college  funding as easy as possible. Learn more about College Loans at http://www.nextstudent.com/.