Quick memo to anyone with government-insured student or parent loans: If you move fast, you can nail down an interest-rate break.
On July 1, rates on insured education loans will rise by more than 1 percentage point. But you can lock in today's lower rates by applying for loan consolidation no later than June 30.
Normally, interest rates on these loans are determined after the lender completes the paperwork, which would be July.
"But we just learned what the new interest rate would be, and wanted to give borrowers a last chance at the lower rate," says Denise Leiseste, head of the U.S. Education Department's loan-consolidation office.
When you consolidate, you take all your separate, government-backed student loans and combine them into a single loan. Parents can consolidate their government-backed PLUS loans.
You can also "consolidate" a single loan, to get a lower rate.
You don't have to put up any collateral or pass a credit check. Consolidation loans are granted on your signature alone.
The interest rate on Stafford student loans currently ranges from 6.32 percent to 7.72 percent, depending on when you originally borrowed. These are variable rates that change once a year.
Starting July 1, the new range for Staffords will be 7.59 percent to 8.99 percent (again, depending on when you originally borrowed).
PLUS loans cost 7.72 percent to 7.98 percent today. Starting July 1, you'll pay 8.99 percent to 9.48 percent.
There are two big advantages to consolidating.
First, you'll get a fixed rate of interest instead of a variable rate. So you won't have to worry that payments will rise. If rates fall in the future, you can consolidate again.
Second, you'll be able to make a single payment, rather than multiple payments on the multiple loans that you have now.
Standard repayment terms range from 10 years to 30 years. But consolidation can be smart even for people with fewer than 10 years left on their loans.
You can switch to the new loan, lock in a lower interest rate, and continue making the same total monthly payment you did before. That way, you'll pay off your loan over the original term.
Both the government and private lenders offer loan consolidation. You pay no upfront fees.
It doesn't matter whom you borrowed from before. Government-backed loans such as Staffords and PLUSes can be consolidated with any lender in the insured-loan program.
You can apply for federal consolidation loans by Web (www.loanconsolidation.ed.gov) or mail (Loan Consolidation Center, P.O. Box 1723, Montgomery, Ala. 36102; the form can be downloaded from the Web site). Applications have to be entered or postmarked by June 30.
If all your loans came through the government's own direct-loan program, you can consolidate by phone (800-557-7392).
Private lenders generally require a written application, faxed or postmarked by June 30. You can get a form by phone or through the Web site.
You might think that all consolidation loans are the same. But in fact, some lenders offer slightly different terms.
The government will consolidate loans of any amount. If you consolidated once before, at a variable interest rate, you might save money by consolidating again.
You can save one-fourth of 1 percent on your interest rate, if you'll arrange to have loan payments taken automatically from your account.
Only the government takes defaulted loans on which payments currently aren't being made (as long as there's no judgment against you).
Collegiate Funding Services in Fredericksburg, Va., will consolidate a minimum loan of $10,000. If you make 60 consecutive on-time payments, CFS will lower your interest rate by 0.25 percent to 1 percent, depending on your balance. That has the effect of shortening the length of time you have to pay.
You can reach CFS at 888-423-7562 or www.cfsloans.com.
Sallie Mae, also a private lender, will consolidate a minimum loan of $7,500 (800-524-9100 or www.salliemae.com). But borrowers get no interest-rate breaks.
You can also consolidate through the lender who gave you the original loans. Check its terms against those given above.
Not all private lenders guarantee you today's low rates if you apply by June 30. So be sure to check the deadline dates. If your lender won't cooperate, switch to one of the lenders above.
By the way, these loan-consolidation programs can't be used for private education loans. They're only for loans that are federally insured.
Washington Post Writers Group