For the last month all of the financial and economic folks have been anticipating tomorrow´s July 1 almost-certain interest rate hike. The hike will probably be at least 1.5 percent, and quite likely 2 percent. So, if you´ve been putting off consolidating your student loans to a fixed rate, you are quite, literally, almost out of time. Most places, however, if you get your application in now (usually online), will honor the consolidation at the lower rate, even if it takes you weeks to get your consolidation approved and arranged.
Why consolidate your student loans
Not only can save money on your overall monthly payments with student loan consolidation, but you can also save money in the long run with the lower fixed interest rate. When you consolidate student loans, it works a lot like other loan consolidations: you pay interest only once, on one loan, and you make only one monthly payment. Plus, with the interest rate hike, you can save thousands of dollars over the life of your loan. If you have $30,000 in student loans, and you consolidate now, before tomorrow´s rate increase, you can lock in a rate that helps you avoid paying up to $3,000 dollars or more in interest over a 10-year loan term.
Consolidating private student loans
It is important to note that you cannot consolidate private student loans with your federal student loans. Federal loans are subsidized by the government, and therefore separate. However, you can consolidate your private student loans separately. If you have a few private student loans it might be a good idea to consolidate them in order to lock in an interest rate. Private student loans are already sitting at between 6 percent and 8 percent, but if you haven´t consolidated them to a fixed rate, come July 1 you might find that your interest rates are up to 7.5 percent to 10 percent. Not pretty.
Things to remember
Realize that if one lender holds all of your student loans, you will be required to consolidate with that lender. However, if you have different lenders for your student loans, you can do some quick shopping around. It should only take you a couple hours online to find a lender that offers a package that works for you. Some features to look for:
- Reduction in interest rate for automatic payment
- Reduction in interest rate after making 36 consecutive online payments
- Willingness to honor low fixed interest rate if you start consolidation today and the process continues for weeks
- Offers to let you choose your own due-date
- Offers to honor your grace period if you are still within six months after your graduation
Taking advantage of the loophole
Finally, you should realize that there is a loophole now that can allow you to consolidate student loans even if you are a student. After tomorrow, that loophole closes. Future consolidations can only take place after you have graduated. So now is an ideal time to consolidate any student loans you have right now, even if you haven´t graduated yet. You could save a lot of money.