Date Created: Jun 20, 2005, 03:02 PM
Interest rates are about to change for Student Loans and if you're not careful, you could wind up owing a hell of a lot more than you originally planned.
If you haven't consolidated your student loans and locked in the current low interest rates (about 2.875% for those not in repayment and upwards of 3.75% for those currently paying) you could get caught in the July 1st change of rates... which can be upwards of 5% or more!!! And that's just for the current interest rate change. If you have your original loans from school, you could end up in the same interest rate rise every year. With historically low interest rates now, it would make sense to lock in those rates so they'll never change for you by consolidating all your semester based Stafford loans (and other loans if eligible) into a single loan with fixed interest.
There are many ways you can do this, usually through whatever bank or entity you opened these loans up with originally such as Sallie Mae. If you are using the Federal Direct Loan system, i would suggest that you consolidate through a trusted bank that you normally use or Sallie Mae so you can take advantage of less paperwork and easier online pay in the future.
While you're at it, you can change your payment schedule to one more compatible with your current age and lifestyle... such as a graduated payment plan that's spread over 20 or 30 years. Such a plan starts with small payments for the first five or so years and then raises them later. This will definitely help you out in your "getting started" years. You can also benefit from some payment incentives that the loan entities give such as a reduction by 1% in interest if you conscientiously make your payments over a 36 month period. In either case, never be late in your Student Loan payments... even if you declare bankruptcy it is one of the few debts that will still follow you until you repay.
Whatever you do, don't wait until July 1st to consolidate or you could end up owing thousands of dollars more than you need to.
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