Consolidate Your Loans Now!!!

6 Jul

Note: None of the following should be taken to be professional advice on the subject matter. Before choosing any course of action, be sure to consult your school’s financial aid office, loan issuing agency, or the Department of Education’s website. This article contains information that the author has taken care to verify. However, be sure to do your own research and make the choice that’s right for you.

: Now that we’ve gotten that out of the way, Consolidate your loans NOW!!! In all seriousness, if you meet the requirements of the program, now is a great time to consolidate your federal student loans, including Stafford, Perkins, Grad PLUS and the Federal Family Education Loan. In addition to having federal student loans, they must be variable interest rate loans, generally, those are loans taken out before July 1, 2006. And this is why: as of July 1, 2008, interest rates have decreased for those loans that have not been consolidated by 3.01%. If you choose to consolidate, you will lock in a rate of 3.61% if you are in deferment, your grace period, or still in school (although if you are still in school you can not consolidate until your graduate). That’s down from 6.62% if you are in school, grace period or deferment, and 7.22% if you are in repayment or forbearance. Those rates are even higher if your loan was taken out (originated) before July 1998 (up to more than 8%!). Most importantly, private loans can not be consolidated in the federal program.

For those of you like myself who have already consolidated your loans, those loans are now at a fixed rate. If you consolidate in the future with other loans, the interest rate will equal the average of all the interest rates of your individual loans.

You should know that this rate is tied to the 91 day treasury bill so in the future it can either decrease or increase. From where I sit, now is a great time to consolidate. While the rate has been lower in the past, I figure if the economy starts to improve between now and next year, the rate should also go up. The cap for the rate is 8.25%, so the difference is pretty remarkable.

There’s a lot of information to digest, so let me direct you to the Federal Direct Consolidation Services. Good luck!


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