Consolidate your loans prior to July 1, 2007 to beat the deadline

Interest rates on variable student loans will rise again this July 1, 2007 for the third consecutive year. This applies to all federal loans that were taken out prior to July 1, 2006.

Students graduating this spring with federal loans will find the majority of their loans in this variable category. Student Loan Consolidation is the only way to lock in the rate and ensure future rate hikes do not impact the loans. Additionally, consolidating under the Federal Consolidation program will extend the term of the loan reducing the monthly payments by up to fifty-five percent.

The government sets the consolidation rate. Most graduating students will have a combination of loans at a 6.54% variable and one loan at 6.8% fixed rate. On July 1, 2007 the variable rate will adjust up to 6.62% for students just graduating who are still in their grace period. More importantly once a student goes into repayment, 6 months after exiting school the rate will adjust up again to 7.22%.

The rate increase is a slight increase this year but when combining the repayment rate increase, it makes sense for any student with loans to consolidate prior to July 1.

"The program was designed to assist students and parents in managing their student loan debt and it is an excellent way to reduce monthly payments," says Mary Montiel of Collegiate Funding in San Diego (http://www.collegiatefunding.com/).

Borrowers should look for lenders who offer borrower incentives plans, such as rate reductions for auto-debit and on-time payment, to further reduce the rate.

"A student who consolidates prior to July 1, 2007 while still in their grace period, will save thousands of dollars overall. We offer an incentive plan that further reduces this rate another 1.25% down to 5.3%," says Montiel.

A student with $20,000 in debt will save $3,700 over the life of the loan with this plan.

Source: Collegiate Funding

Web site: http://www.collegiatefunding.com/