Consolidate Student Loans… Now!

Posted on 01. Jun, 2006 by in Saving & Investing

studentloan_cartoon.gifIf you had to take out some student loans in order to pay for your education, you’ve probably received dozens of offers from dozens of different companies trying to get you to consolidate your student loans. While you’ve probably been throwing all those offers away, you might want to hold on to a few of them now.

The reason is that rates on student loans are recalculated or adjusted every year based on what the 3-month Treasury yield is at the end of May. Since this time last year, that yield has risen nearly 2 percentage points. And it may not go down much between now and May 30, even with the recent bond market rally. This translates into a very high probability that the repayment rate on the federal loans for Stafford loans will to jump to about 7.3 percent from 5.3 percent currently.

By law, you’re only permitted to consolidate your student loans once. So if you’ve done so before, you’re out of the running. If you haven’t consolidated then I would recommend doing so now. Mark Kantrowitz, founder of FinAid.org has listed a few things to keep in mind when consolidating:

  • You must consolidate by June 30 to get the best rates
  • You may consolidate to get a better rate even if you just have one loan
  • If all your loans are from one lender, you must consolidate with that lender
  • If you have loans from more than one lender, ask your school’s financial aid office which lenders offer the best consolidation deals in terms of discounts and customer service
  • Opt for a lender that offers to knock at least a quarter point off your consolidated rate if you agree to electronically transfer your payments
  • When you consolidate, don’t include any Perkins loans you may have. It’s already a fixed-rate loan, so there’s no benefit from consolidating it and you may, in fact, lose some of the benefits such as certain loan forgiveness provisions
  • If you’re married and both you and your spouse have student loans, don’t consolidate them into one loan. If you divorce, you’ll both be on the hook for repayment of the full amount. If your split is acrimonious and one of you reneges on your half of the bill, the other person will be held accountable.

5 Responses to “Consolidate Student Loans… Now!”

  1. AJ

    01. Jun, 2006

    I’m currently accumulating loans to pay for grad school now. Should I wait until I finish to consolidate or will all future loans be consilidated into whatever rate I consolidate to now?

  2. Student Loan Consolidation – How To Get The Best Rates And Plans?

    http://students-consolidations.blogspot.com/

  3. Consider this. If you have $30K in student loans, this interest rate change will mean you’ll pay an additional $6,300 to Uncle Sam… for no good reason.

    Why bother?

    Christopher S. Penn
    Daily financial aid internet radio on demand
    http://www.FinancialAidPodcast.com
    Got iTunes? http://www.FinancialAidPodcast.com/subscribe/
    Got loans? http://www.FinancialAidPodcast.com/consolidate/

  4. Stephanie

    29. Jun, 2006

    One of my seniors had consolidated with this one company last year…he was happy with the service and speed….his consolidation was done in ONE DAY flat…( It had to….it was 30 June …Hahaha )….I have the no….though I am not sure its functional…but u cud give it a try….its 1800-446-5418…..

    Cheers

Trackbacks/Pingbacks

  1. Little Fries » Fries With That - June 1, 2006

    […] Beancounterblog has a very clear explanation of why you must consolidate your financial loans this year. […]

Leave a Reply