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Is It Right for You?
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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. It’s 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 Loans

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. You’ll 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 it’s 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 later!

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 through Sallie 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 Education’s loan consolidation program.


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