What's New in Finances
Consolidating college loans may save you money
The government is offering reduced interest rates to borrowers who consolidate their federal education loans by September 30, 2001. This incentive is designed to reduce the default rate on student loans.
Under the Direct Consolidation Loan program, your college loans are paid off and a new consolidation loan is created. You may choose from four different repayment plans, and you may switch plans at any time.
The new fixed-rate loan is based on the weighted average of the loans you are consolidating. However, the rate cannot exceed 8.25 percent. If you consolidate your college loans by the September 30 deadline, you’ll receive an interest reduction of .8 percent. If you pay electronically, the rate drops another .25 percent. Certain loans are eligible for an additional up-front interest rebate of 1.5 percent of the loan balance.
Consolidating different types of federal education loans into a single loan may make your debt more manageable for several reasons.
- The interest rate may be lower.
- You may be able to extend the repayment period.
- The monthly payment amount may be lower.
- You’ll have a single payment and a single lender (the Department of Education).
To find out more information about these loans and whether they might fit into your financial plan, give us a call or visit www.loanconsolidation.ed.gov.