Tuesday, June 20, 2006

Consolidate Student Loans Now Or Pay A Lot

If you haven't consolidated your Federal student loans yet, time to get off your diaper (okay, most of you reading aren't still in diapers, but you know what I mean) and get it taken care of. If you have procrastinated this long, it's becasue you think its a hassle, but that hassle will save you a few thousand dollars in interest charges and maybe a lot more - your deadline for getting it done is July 1.

President Bush has also made it a bit easier for you to do so. The old law stated that you has to consolidate your federal student loans with the same entitiy where you received your original student loan and it was a pain for some to try and figure out where that was. As part of an emergency spending bill signed recently by President Bush, Federal student loans can be consolidated with any lender meaning you have one less excuse to get this taken care of right away..

From Saving Advice:

For example, Stafford loans will rise to 7.1% from the current 5.375%. Borrowers who consolidate loans they're already repaying can lock in this rate if they do so before July 1. For those that happen to be in their "grace period" (the six-month window between graduation and when they're required to start making payments on their student loans), they can lock in an interest rate of 4.75%.

There are only a couple of weeks left, so put it on your calendar to get the process to consolidate those loans moving today.


collegesaver said...

Any idea on whether or not loans can be consolidated if I'm still in college?

financial baby steps said...

from finaid.org

The conventional wisdom is that students with bank-based federal student loans (i.e., funded by a bank or other financial institution) can only consolidate their loans during the grace period or after the loans enter repayment. However, there is a loophole that allows students to consolidate their loans while they are still in school by first asking that the loans be put into repayment status early. (This loophole has been repealed, effective July 1, 2006, by the Deficit Reduction Act of 2005.) Once the loans are in repayment, they can be consolidated, locking in the repayment interest rate. After the loans are consolidated, the student asks for an in-school deferment to delay the repayment obligation until after they graduate. (Some lenders will provide the loans with an in-school deferment before consolidating them, in order to allow the loans to lock in the lower in-school rate.)