Perhaps you were the student who waited until the last minute to cram for finals
or routinely rolled out of bed five minutes before morning classes began.
Procrastination is a common part of many students' college experience. However,
putting off consolidating your student loans and locking in the current interest
rate won't harm your grade point average, but it will affect your financial
future. If you are thinking about student loan consolidation, you have until the deadline of
June 30, 2006 to take advantage of the current low interest rates.
With interest rates expected to increase from 4.7% to 6.8% on July 1st, not
consolidating your student loans could be a big mistake that will cost you
thousands of dollars. For example, if you currently owe $30,000 in Federal
Stafford Loans, monthly payments are $314. This amount can drop to $217 if you
do a loan consolidation with the current interest rate. If you don't meet the
deadline, you will soon be paying $345 a month. Wouldn't you prefer to be doing
something else with $128 every month? As well, parents who are currently paying
on PLUS loans should expect a hefty increase to what they are paying in interest
if they don't lock in the current rate before the deadline.
Besides the annual adjustment to the student loan interest rates, sweeping
changes to the terms of financial aid are due to take affect on July 1st as part
of the U.S. Congress' Budget Reconciliation Act, and most of these changes will
not benefit borrowers. Among the changes, students in school will not be able to
consolidate their loans. As well, loan origination fees for students will be
doubling, and the "in school" interest rate that currently gives students
attending classes or in their grace period a discount of .6% will be
discontinued.
Another reason not to delay in consolidating student loans is that there may
not be an amnesty period for borrowers who fill out applications that aren't
processed by the deadline. Last year, a flood of applications were received the
day before the rate hike went into affect, and the U.S. Department of Education
generously offered amnesty for those who had submitted completed applications
prior to the deadline. This year the Department of Education might not be so
kind, and applicants who haven't completed their consolidations before July 1st
could be faced with having to pay the higher interest rate. Because student loan
applications can take anywhere from one to 4 months to be processed, the time to
submit an application is now.
The good news is that if you are considering a student loan
consolidation, you still have enough time to complete the process and take
advantage of the current interest rates and terms. It only takes a matter of
minutes to fill out an application, and there is lots of help available. So, go
ahead and get started, and pat yourself on the back for taking charge of your
financial future.
