Is It Right for You?
The Negative Side of Consolidating
The flip side of the equation is that if you have private
lenders for your loans, you will not be able to consolidate
your loans through federal consolidation. However, there
are some private consolidation lenders you may want
to look into. Keep in mind that they are not held to
the same regulations that federal loan consolidation
programs are by law. Another thing to consider is that
consolidated loans allow you to pay back the amount
of the loan in more than ten years. However, doing so
would not be advised financially because you will be
paying interest on the loan the entire time. Its
best to get your student loans paid and be able to keep
your monthly payment amount for savings each month.
How to Consolidate Your Student
To consolidate your loans, log on to FinAid
for an extensive listing of banks that can provide information
on, and set up, your consolidated loans. Youll
need to fill out a little information on yourself and
then the financial institution of your choice may handle
the majority of the work, like finding all your loans
and putting them in one account. Whether they do this
or not, make sure you go through your own records to
make sure that everything they find is accurate.
You may only consolidate once, so if rates go down
you will be stuck with your current rate, although a
lower rate is unlikely and a significant increase is
expected come July 1. Whatever you do, you might as
well decide your financial fate now, before its
too late. Inaction may be a way of choosing, but not
necessarily the smartest choice for your circumstances.
Study your finances now, so you can study for exams
Tiffany Young is an Austin-based writer and photographer.
Student Loan Consolidation: What
You Should Know
- Interest rates for adult students attending college
or in their six month grace period will rise from 2.77
percent to 4.66 percent on July 1. Rates will rise from
3.37 percent to 5.26 percent for borrowers who are making
payments on their loans. If you are not enrolled in
classes and are in loan repayment for your Stafford
loans, consolidating a debt of $20,000 could save you
$4,500 over 20 years. Graduate students who owe $55,500
could save $14,668 over 25 years.
- Students should only consolidate variable-rate
loans (for example, Stafford Loans), not fixed-rate loans
(like Perkins loans). Because Perkins loans are fixed
rate, thre is no financial benefit and you may lose some
loan forgiveness provisions: for certain types of service
(such as teaching or nursing), disability, services in
the armed forces or Peace Corps, etc.
- Student loan consolidation programs are not the same
among lenders, with varying interest rates, grace periods,
penalties for late payments, and time for loan repayment.
Consolidation may result in the loss of benefits such
as loan deferment and some loan forgiveness options.
If you have loans with more than one lender, research
which lender offers the best consolidation package in
discounts and other incentives. For example, consolidation
Mae offers a 0.25 percent reduction in your interest
rate when you automatically transfer payments from your
bank account. When you pay on tme for 36 months, your
interest rate is reduced another percentage point. The
Sallie Mae site offers an online calculator to show
you how much you might save. You might also research
the benefits of consolidation through the Department
of Educations loan consolidation program.