Consolidating Student Loans
Learn How To Benefit From Low Interest Rates
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If you are a college student or a parent who has been borrowing money, it's time to lock in those loans.
Interest rate cuts are bringing joy to thousands of college students and their parents. For those who are borrowing to pay for tuition, consolidating loans now could save thousands of dollars down the line.
Interest rates in two of the most popular student loan programs are at their lowest levels in 20 years.
According to Carol Marie Cropper, Personal Finance Editor for Business Week, "For students borrowing through the Stafford loan program, rates are now below 6 percent. And for parents in the Plus program, they are below 7 percent." That is close to a two-point savings from previous rates.
Stafford's rates have plunged from 7.59 percent to a low 5.39 percent for students still in school. For graduates making payments, the rate fell from 8.19 percent to 5.99 percent. Parents in the Plus loan program, can see that rates have dropped from 8.99 percent to 6.79 percent.
Borrowers can seize this opportunity to lock in low rates by consolidating their variable-rate loans into one fixed-rate loan.
"In addition you can get discounts for paying automatically or if you refinance or consolidate right now, you can get a discount through the government's program," Cropper says.
The government’s Direct Loan program will shave an additional eighth of a percent off the rate for those who apply before September 30. Most lenders will also take another .25 percent off for automatic payments.
Business Week explains how you'll benefit from consolidating your student loans:
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You will have one lender and one monthly payment by combining your different student loans into one loan. Check with your current lenders to see if they can offer terms and repayment plans that meet your needs. With only one lender and one monthly bill you will find it easier to manage your debt.
You can get a lower fixed interest rate for the life of your loan. Borrowers with a Direct Loan or FFEL loan in an in-school or grace period at the time they submit their application, may be able to benefit from a lower fixed rate on direct consolidation loans.
Many lenders offer flexible repayment options to meet your different needs.
Consolidating your loans may lower your monthly payment.
If you decide to consolidate while you are still in school, you may receive a 6-month grace period before repayment begins
Consolidation loans do not exclude anyone on the basis of the size of their loan debt.
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