Student Loan System Changing!
If you haven't already consolidated your student loans, Clark urges you to do so BEFORE JULY 1, 2006. If you consolidate before then, your loans will have a fixed rate equal to the weighted average of all your current loan rates. And it should be fairly close to the rate you have now. If you don't consolidate before July 1, all of your existing Stafford and Plus loans will become variable for the life of the loans. And they are likely to escalate.
Here is a chart with current loan rates and the rates that go into effect for new loans after July 1:
| Type of loan | Current rate | Rate after July 1, 2006 |
| STAFFORD |
4.7% (in school)
5.3% (out-of-school) | 6.8% |
| PLUS |
6.1% | 8.5%* |
| Stipulations | "Current rate" is variable, meaning it changes once a year | The rate after July 1 is fixed for life, regardless of whether you are in school.
* Congress may amend this rate to 7.9 percent before July 1 |
One of the hottest areas of Clark's site is his
529 Plan Guide. He's now made his fourth revision to this invaluable resource so that you can continue being "Clark Smart" when saving for a child's education. The idea behind 529 Plans is that the money you save will grow tax-free and can be spent tax-free on college education. If the child doesn't go to college, you can transfer the plan to another child for free without being taxed. If there are no other children you want to have the money, you can use it yourself. But beware that you'll pay a 10 percent penalty plus tax if you take this latter option.
All 529 Plans must have state sponsorship, but you're not limited by where you live as far as making contributions. You may, however, enjoy a state tax deduction if you select your own state's plan. 529 Plans are great when they're purchased correctly. But a lot of money goes in the wrong way through commissioned salespeople, banks, stock brokers and financial advisors who take a cut of your money. You should buy 529 Plans directly through the state that sponsors them. If your state isn't listed in the "Honor Roll" section of Clark's guide, pick a state from his "Dean's List." There you'll see plans from Utah, Iowa and New York. These are the lowest-cost plans available across the board. Utah is by far the single best plan in the country. One of the most unique things about 529 Plans is that they're all very flexible. You can put in as little as $15/month or a rich grandparent can pop in as much as $60,000 all at once. One caveat from Clark: Do not save for your child's college education until you save for your own retirement. There are no scholarship plans for retirement!
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