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Consolidate Student Loans

HURRY UP: Consolidate Student Loans Now Before Rates Rise On July 1.

If you have unconsolidated student loans, or know anyone with unconsolidated federal loans, listen up: now is the absolute last chance to lock in the lowest interest rates in history. That's because the interest rate on Federal student loans have a variable rate that is reset every July 1. And this July 1st is going to be a doozy: the rate is probably going to climb at least two percentage points.

Right now if you are still in school or within the six-month grace period after graduation you may be eligible to consolidate at a ridiculously great 2.875 percent. If you've been out of school for a while you may be able to consolidate at 3.37 percent. And some lenders offer discounts of up to 1.25 percentage points if you agree to have your payments made via direct deposits from a checking account.

But if you do nothing now, or consolidate after July 1, the base loan rates are going to jump up. We won't know the final figures until later in June, but it's likely the in-school/grace period rate will be in the vicinity of 4.5 percent and the out-of-school rate will adjust to close to 5.2 percent. Why the hell would you willingly pay those higher rates if you can lock in the lower rates for the life of your loan?

Come on, Consolidate!

Consolidate Even if You are in School
In a neat twist, the Dept. of Education now says it is totally okay for students with FFEL loans (loans from financial institutions rather than direct loans from the Dept. of Education) who are still in school to consolidate today to lock in the low rates before July 1. Technically what happens is that you will ask for your loan to be put into repayment. Then from there you can consolidate. Once your loans are consolidated you will request an in-school deferment so you won't have to start making payments until after graduation. You typically can't consolidate if your loans total less than $7,500, so in-school consolidation is most practical for juniors and seniors. The one small downside to doing this is that you will probably lose out on the typical six-month grace period after graduation where you don't have to start loan repayment. But I still think it is worth trying to get your loans consolidated now, rather than face much higher loan rates down the line.

(By the way: if you have a Direct Loan from the Dept. of Education you have always been eligible to consolidate while in school.)

Don't wait until June 30th

Procrastination is not going to work. You need to complete your consolidation application by June 30th. So please don't let this slide; start the process now. Begin by checking in with your current lender to see what consolidation options are available. If you have loans from more than one lender, you can shop around for the best consolidation deal.

Some of the largest student lenders are:

Sallie Mae
NelNet though it offers in-school consolidation only to students whose current loans are through Nelnet.
Collegiate Funding Services
If you have a Direct Loan from the Dept. of Education check out its Loan Consolidation site.

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