By Jeff McKinney
The Cincinnati Enquirer

Patience could pay off big for borrowers with federal student loans, particularly those considering consolidating loans to reduce expenses.

As of July 1, the interest rate on Stafford loans is expected to drop below 3.5 percent, down from the record low 4.06 percent rate now, according to Bankrate.com, which tracks various bank rates.

The new rate will affect Stafford loans obtained after July 1, 1998, and remain in effect until June 30, 2004. A borrower who consolidated $25,000 in Stafford loans after July 1 would save about $2,000 during 20 years, or about $8 monthly, according to Sallie Mae, the nation's largest provider of student loans.

"Borrowers need to know they have reason to wait and watch if they're thinking of consolidating," Patricia Scherschel, a spokeswoman at Sallie Mae, says.

Rates on Parent Loan for Undergraduate Students also are expected to drop, to 4.22 percent as of July 1, down from 4.86 percent now.

Bankrate.com says borrowers often opt for consolidation loans to cut expenses. Such loans can cut a borrower's monthly payment by up to 40 percent and expand the repayment period.

Banks take steps to stamp out abuses

Several U.S. banks, including those with Tristate operations, are boosting efforts to help consumers stay away from abusive or predatory lending practices, according to a new survey by a bank trade group.

About 72 percent of in-house bank programs are targeted toward helping borrowers avoid predatory-type practices, up from 60 percent before, according to the Consumer Banker Association's third annual "Survey of Bank Sponsored Financial Literacy Programs." Thirty-eight of 53 banks surveyed said their operations now offer programs to consumers to avoid such things as excessive interest rates, payday loans and unscrupulous lenders. Predatory lending - particularly toward elderly borrowers - has been a growing concern.

About 98 percent of those surveyed said they now sponsor financial literacy programs or support those efforts via partnerships, covering such things as mortgage and homeownership counseling.

Moreover, 37 percent of those surveyed said their institutions had a foreclosure prevention program in place for borrowers.

Bank One appears ready to expand

Bank One Corp., historically one of the industry's most acquisitive banks, could be hungry for another bank.

Bank One, hoping to boost profitability, might look for another large banking company to buy to improve its future growth prospects, according to an article in Barron's.

The publication listed such banking powerhouses as PNC Financial Services Group Inc., KeyCorp, SunTrust Banks Inc. and FleetBoston Financial Corp. as potential acquisition candidates.

Deposit insurance to undergo change

Regulators have rejected plans to raise deposit insurance in a proposed bill to merge federal deposit-insurance funds for banks and thrifts.

Under the measure, a single Deposit Insurance Fund would cover depositors at U.S. banks and savings and loan companies at the rate of $100,000 an account now, instead of $130,000 as proposed in a bill the House passed last month. The Federal Deposit Insurance Corp. would have more flexibility to assess financial entities to maintain the fund.

Lawmakers said two insurance funds aren't needed because the distinction between the deposit insurance funds has become blurred with banks buying savings and loans, and vice versa.

Recent changes in banking law permit brokerages to own banks, yet many hadn't had to pay into the deposit insurance funds. Banks said it was only fair to make them pay to support the fund.

E-mail jmckinney@enquirer.com