Consolidate Student Loans ASAP

[jeffrey]

If you have student loans and are considering consolidating them, you now have a time-limit: July 1. As part of its $40 billion budget cutting effort, congress has raised the interest rate of Safford loans to 6.8% (one of the more popular student loans because borrowers don't have to show a financial need to get one) and has made this rated fixed, not adjustable as it currently is.

This change can have a significant affect on the amount you pay. If you currently have a Stafford loan, you can consolidate and lock in a rate of 5.375% for its life. If you happen to still be in your grace period, you can lock in a 4.75% rate.




Parents of students will also have to pay higher rates under the new law. The rate for PLUS loans (Parent Loans for Undergraduate Students) will become a fixed rate of 8.5%. PLUS loans currently sit at 6.1% and are variable.

The new rates will increase the cost of college by quite a bit. If you currently have a Stafford loan balance of $20,000 and paid the new 6.8% rate compared with the current low rate, it would cost more than $2,000 more in interest over a standard 10-year life of the loan. With PLUS, parents would have to pay nearly $3,000 more.

With interest rats not likely to fall between now and July and with a chance that they will rise, now is the time to get low rates locked in. If you have student loans and you haven't consolidated them, be sure to make that one of the first New Year's resolutions that you complete.

[gakline]

I was lucky enough to get them consolidated last June when rates were still 3.37%

[jIM_Ohio]

be careful of refinance offers which stretch the typical student loan repayment from 10 yrs to 20 or 30.

I found it best to keep my student loans intact (not consolidate) and then pay extra on one of them per month. This reduced my debt repayment from 10 years to 7 years.

This allowed me to buy my first house 3yrs after graduating and another bigger house 4 yrs later being competely debt free.

Paying off the loans early will jack up your credit score as well.

[fairy74]

I'm with gakline, got my consolidated last year. Before consolidation my monthly minimum payments were $800.00 after consolidation $255.00, I just continued making the $800.00 payment (and more when I can) so that I can get those suckers paid off asap.

[jIM_Ohio]

Originally Posted by fairy74

I'm with gakline, got my consolidated last year. Before consolidation my monthly minimum payments were $800.00 after consolidation $255.00, I just continued making the $800.00 payment (and more when I can) so that I can get those suckers paid off asap.

More than likely with a payment difference this significant, you have the period of the repayment increased. Even if rate was cut in half, you are still paying 2X more in interest over 20 years than you would have with higher payment and 10 yr repayment period.

[gakline]

Originally Posted by jIM_Ohio

More than likely with a payment difference this significant, you have the period of the repayment increased. Even if rate was cut in half, you are still paying 2X more in interest over 20 years than you would have with higher payment and 10 yr repayment period.

Actually, when I consolodated at the lower rate, my payments dropped ~$50 per month. That is keeping the same 10 year repayment schedule. When I had been paying $175 with the variable interest rate, more of my payment went to the principal. However, after the rates raised, I lost that bonus. By consolidating, I really am saving money even if I'm paying less.

Since my rate was 3.37% I can make more putting the extra $50/month into ING and make almost 2%more with my money.

Also it's worth consolidating because you get discounts from your lender. Mine offers -0.25% for direct withdrawls and after 2 years on time payments another -1.0%. That drops my interest to 1.25%. Even if my repayment period was extended, I'd be making money somewhere else.

This would be true for anyone who can earn a higher interest rate at any bank.

[krayziebone33]

This may be a bit of a stupid question, but how do I go about consolidating my loans?

[gakline]

Call up your lender and ask what the current rate is. You can also wait until May to see what the new rates will be. If the new rates are higher, lock in. If they're lower, wait another year. Right now things appear to be going up.

[cantretire]

Also, sign up for electronic payments. I have Direct Loans and will save .25%. It adds up over 10 or more years!!!