If you've got a bunch of student loans, consider consolidating them. You have until June 30 to do so at the current low-low-low interest rates. Rates for Stafford loans have recently been 2.77% while borrowers are in school and during the first six months after graduation, and 3.37% after that. PLUS loans recently carried a rate of 4.17%. These rates may jump as much as two percentage points come summer.
The effect of consolidation can be significant. As Kiplinger's magazine pointed out, "Consolidate a $20,000 Stafford loan at 2.88% and you'll pay $110 per month, including about $6,300 in interest over 20 years." If you don't consolidate and you pay 5.38%, your total interest cost would double to $12,700. Those in medical or dental school with massive borrowing may save tens of thousands of dollars by consolidating.
- While your monthly payment will probably be smaller after consolidation, your total cost may increase if you're significantly stretching out the payment period. In other words, if your loans have four years left on them, your consolidated loan may give you a fresh 10 to 30 years to pay. You can save a lot of money by paying off the new loan early. If you owe $110 per month, try to send in considerably more than that as often as you can.
- Private lenders can help you save more by offering you even lower rates. Check with the likes of Sallie Mae
(NYSE:SLM)and Citigroup (NYSE:C).
- You may be able to have your payments automatically deducted from your bank account. This can help you avoid missing payments and can keep your credit report in tip-top shape. (Learn how to check your credit report and why you should want to.)
- Get details. Ask about any penalties involved and the repayment terms, among other things.
Here are some Fool articles on student loans and paying for college:
- Get Record-Low Rates
- You Can Pay for College
- Advice for College Freshmen
- Starting Late at College Savings
You'll find lots of additional tips on 529 plans and paying for college in our College Savings Center. Our Paying for College discussion board is a good place to ask questions you may have, and our book, The Motley Fool's Guide to Paying for School by Robert Brokamp, is also a handy resource.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.