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As many had predicted, Federal Stafford and PLUS loan rates will increase in July. I wrote about how graduates should consolidate ASAP ^[3] instead of waiting, since the process typically takes two months to complete; but back then the actual rate hike was a mystery. Luckily, with most lenders your rate is locked whenever they being the processing. Smart Money predicted that the rate would be around 5.14% which is not far off from the actual rate come July 1st: 5.3% (an increase of 1.93%). The Federal PLUS loans are going to jump 1.93% to settle in at 6.1%.

1. You may only consolidate once.
2. The rate you get on the consolidated loan is the weighted average of all your loans rounded up to the nearest eighth.
3. The rate is fixed for the term of the loan.
4. There is talk in Washington of eliminating the fixed rates for consolidated loans! (a good reason to consolidate ASAP, as if money wasn’t enough)
5. Don’t include fixed rate loans (like a Perkins).

Consolidating Loans While Still In School:
If you are currently a student, you may consolidate now before graduation. Request early repayment status from the lender and then ask the lender for an in-school deferment. This is similar to what happens if you graduate, start paying your loans, and return for a graduate degree. You would lose your six month grace period after graduation because the deferment is only active while you are enrolled. You would get the low rates locked in now and still only have to start paying after graduation.