You refinanced your home and lowered the interest rate you pay on your credit card debt, as well. (Good show!) But if that urge to reap significant interest savings hasn't passed, you're in luck -- there's another opportunity out there. Consolidate your student loans and take advantage of rates that haven't been this low in nearly 40 years.
Whereas many student loans have variable interest rates that will likely rise in coming years, borrowers now have the opportunity to convert those loans into fixed-rate obligations. They could even be restructured to span 15 or 20 years instead of the usual 10.
There are new loan consolidation rates that will take effect July 1. Those graduating from college this year can consolidate Stafford loans with rates as low as 2.875% in the next six months. Those who graduated more than six months ago can consolidate at 3.375%, and those with Parent Loans for Undergraduate Students (PLUS) can take advantage of a 4.25% rate.
Here are some tips on the topic:
- If your loans are from just one lender, that's where you need to go to consolidate. But if you're dealing with more than one lender, you can shop around. There are some additional discounts you may be able to take advantage of -- some lenders, for example, will lower the rate further if you pay electronically.
- There are a variety of plans available from various lenders, including some that permit you to pay less while you earn less, and more when you earn more.
- If you consolidate your loans, the rate you ultimately get will be a weighted average of your existing loans.
- These loans generally don't have prepayment penalties, so you can pay them off earlier than scheduled, to save more.
- The new low rates apply to loans made after July 1, 1998. Borrowers with older loans can expect to pay slightly more.
In an Associated Press story, Mark Brenner of the College Loan noted that, ".a graduate with Stafford loans of $20,000 at an average rate of 5.7% would pay $6,310 in interest over a 10-year repayment period; a consolidated loan at 3.5% would reduce that interest 40% to $3,730." That's not chicken feed.
Congress is reportedly thinking about changing student loan consolidations to a variable, not fixed, rate, in the near future. So that's one more good reason to consider consolidating now.
Learn more at the Department of Education's website and get lots of tips on paying for college at 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.
If you don't have any student loans left, but are interested in investing in companies dealing with them, check out student loan giant SLM
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.