Are you in college or have you just graduated? Do you have student loans? Do you know that the interest rates on student loans are likely to go up by almost 40% on July 1?
You can still save money by putting all of your student loans into one fixed-rate loan and consolidating them.
By consolidating federal student loans, students and their families can lower their monthly payments and lock in low interest rates, which could save them thousands of dollars over the life of the loan.
Nelnet, a major company that helps people pay for college, says that a student with a $20,000 balance and a 20-year consolidation term can save more than $5,000 in interest by consolidating before the July 1 deadline. Locking in the lower interest rate will save student borrowers more than just interest. It will also lower their monthly payment by up to $22.
"Students and recent graduates need to act quickly if they want to save money on this," said Tim Bornemeier, Managing Director of Nelnet Consumer Solutions. "Consolidating your student loans is a good way to manage your debt, and you can save thousands of dollars if you fill out and send back an application before the rates go up on July 1."
Student loan consolidation combines multiple federal student loans, like Stafford and PLUS loans, into one loan with one low monthly payment. For a federal student loan consolidation, the fixed interest rate is found by taking the weighted average of the interest rates on the original loans and rounding up to the nearest 1/8 percent. The fixed rate of interest cannot be higher than 8.25%.
"This is the last chance for students still in school to borrow money," Bornemeier said. "The consolidation programme will change on July 1. Borrowers who are still in school will have to wait until they graduate or drop to less than half-time enrollment before they can consolidate. This means they will have to risk higher interest rates and pay more for their education."
Fred Carter, Associate Vice Chancellor of Financial Aid at Troy University, said, "We strongly urge all eligible students to consolidate before the interest rate change on July 1." "This lets them get the lowest possible monthly payment, a fixed interest rate, and the chance to save thousands of dollars in interest payments. Many of our students still pay off their loans within 10 years, but by consolidating, they can lock in the lowest possible rate for the longest amount of time."
