|
College students who rush from one thing to the next should relax the next
few weeks when it comes to consolidating student loans.
You'll want to consolidate July 1 or after to lock in low fixed rates.
Given the credit crunch, you won't see an onslaught of lenders urging you to
consolidate. So you have to hustle on your own.
If you're graduating with a bachelor's degree this spring, you might want to
consolidate loans taken out as a freshman or sophomore as a way to lock in low
fixed rates.
Rates among the best ever
What kind of a rate would you get by waiting?
"They're among the best rates ever," said Mark Kantrowitz, publisher of
FinAid.org.
You would lock in a rate of 3.625% if you are in college or if you are a
graduate who consolidates during the grace period, a 6-month window after
graduation before loans must start being repaid.
That's down from 6.62%.
And if you're already in the repayment period and have not yet consolidated, you
could lock in a rate of 4.25% on a Stafford loan.
Students who are already repaying variable-rate Stafford loans are paying 7.22%.
Parents with PLUS loans that have a variable rate could lock in a rate of 5.125%
on July 1 or after. That would be down from 8.02% now.
You can consolidate variable-rate Stafford and PLUS loans disbursed before July
1, 2006, but you can only consolidate loans that have not yet been consolidated.
Many students also have federal loans issued after July 1, 2006, and those loans
already have a fixed rate. The fixed rate for unsubsidized Stafford loans, the
most popular federal student loans, is 6.8%. You cannot consolidate those loans
to get lower rates.
Lenders cool on consolidations
Al Hermsen, director of student financial aid at Wayne State University, said
his office hasn't seen many students ask about loan consolidations this year, as
they have in other years.
Loan consolidations aren't a hot product.
Sallie Mae, the nation's largest student-loan lender, announced in April that it
would stop offering federal consolidation loans. All top 10 lenders that
consolidated student loans no longer offer those loans, either.
Hermsen, who has two children who graduated from college this year, said he's
still seeing consolidation offers pop up in the mail at his house. But he said
some look like official notices from the government, and they aren't. So
students should study any offers they get carefully.
One legitimate option is the Federal Direct Loan program (www.loanconsolidation.ed.gov).
You can consolidate with the program, even if your school did not participate in
it.
What happens if you forget
If you do nothing, of course, the interest rates on your variable-rate student
loans would drop anyway July 1. But you'd get that rate for only one year. Given
the concerns about inflation, it's possible that rates could go up in the future.
It could be savvy to take advantage of this huge drop in rates and lock in
something low July 1 or after.
| 
