Originally published March 26 2005
Students should consolidate their student loans now to save money in the long run
by Mike Adams, the Health Ranger, NaturalNews Editor
For students who are carrying loans, it is a good idea to consolidate them now in order to keep the interest rates low. The federal reserve is expected to increase the federal funds rate by almost 2 percent on July 1, meaning that student loan interest rates will take a similar jump. Students who consolidate now can lock in a low rate and pay much less in the long term.
Borrowers who consolidate before then can probably lower their monthly payments in the short term and save thousands of dollars in interest payments over the long term.
Some students who go to private colleges or attend graduate school enter the work world weighed down by a six-figure debt load.
Lenders who market consolidation loans -- and there are hundreds of them -- make the process sound easy.
Congress has proposed and is likely to pass a bill that allows consolidation loan rates to float with the market by 2006, just like regular variable-interest student loans, whose rates are pegged to the 91-day Treasury bill and are adjusted every July 1.
Those rates have risen since last year's adjustment for all those variable-interest loans, to the point that if the upcoming change were based on last week's 91-day Treasury bill auction, the cost of most loans would increase 1.7 percentage points, according to loan experts at Sallie Mae, the country's largest purveyor of student loans.
Come July, the current 2.77 percent rate that applies for borrowers still in school and during the six-month grace period afterward would hit 4.47 percent.
The rate for out-of-school borrowers with loans taken after 1998 would move from 3.37 to 5.07 percent, while parents paying 4.17 percent on their PLUS loans would pay 5.87 percent after July 1.
A consolidation loan pays off all the loans you want to include and creates one new loan, generally with a longer term that serves to lower the monthly payment.
If you have loans through banks associated with the Federal Family Education Loan Program (FFELP), you can consolidate with such lenders as Sallie Mae, Citibank, Collegiate Funding and a number of others.
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