Personal Finance 

Consolidate Your Student Loans NOW!

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JLP posted an article at AllThingsFinancial after reading a SmartMoney article about how student loans rates are probably going up. The SmartMoney article details how student loan rates (Stafford) are probably going to go up by 1% – 2% when they get reset on July 1. Read on for an explanation but the bottom line is if you haven’t consolidated yet, consolidate it before July 1st or you’ll regret it.

Stafford and PLUS loan interest rates are reset on July 1st to the 91-day T-Bill rate set by an auction in May. Last year, the T-bill was 1.07% and student loan rates were 3.37% (as they are now). Due to the recent interest rate increases, the T-Bill is expected to be closer to 3% which would make an adjustment to student rates probable. According to Smart Money, if the rates were set today, the Stafford loan rate would be 5.14%. Smart Money has a very extensive explanation as well as monetary analysis of the impact of their predictions.

I looked at my student loans that I believed were consolidated right after I left college but it appears that half of the loan was consolidated and the rest remained as a Stafford loan. I’ll have to call them up and ask because given the rate hikes the current 3.37% variable rate on the Stafford could jump up to 5%; very very bad for the long haul. The consolidated portion of the loan would still be at the svelte 3.5% rate (with various discounts for automatic ACH payment and X number of timely payments) with no possibility of going up.

Looks like it’ll be time to call up that loan company and see why only half was consolidated (seems strange doesn it?). Be on the lookout for a loan consolidation article in the future, I didn’t fully understand it when I consolidated (you don’t really need to) but I think I probably should. If you have any comments, I’d love to hear them.

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