Travis Altman
College seniors are graduating this month, but there's still one more lesson to go.
They're about to get a crash course in personal finance as they consider whether to consolidate the multiple student loans they've taken out over the past four years. And the process is a lot more complex than it used to be. Mark Kantrowitz, who advises student borrowers through his Web site finaid.org, says combining all your federally guaranteed student loans used to be a "no-brainer." As recently as a year ago, you could lock in historically low interest rates, enjoy the convenience of a single monthly bill and perhaps even extend your repayment period. Now, higher interest rates and rule changes have altered the landscape. Many borrowers saw the changes coming and have already consolidated -- some before they even graduated. Those who didn't now face less attractive options. Kantrowitz says he recently worked with a student who passed up the opportunity to consolidate her $60,000 in debt at an interest rate of 2.88%. Now she is paying 6.83%. "I would have thought that everybody who could consolidate did so," Kantrowitz says. At this point, there is no longer any need to rush. Borrowers normally try to consolidate before interest rates on these loans reset at the beginning of July. (The new rate is based on the results of the last Treasury bill auction in May.) However, this year's hike will be a modest one. The rate for Stafford loans is set to go up just 8 basis points to 7.22% from 7.14%. Parents with PLUS loans will see the same small increase, going to 8.02% from 7.94%. For most borrowers, this difference amounts to just a few dollars over the life of the loan.
RSS
