Student Loan Consolidation Tips

* The best time to consolidate
student loans is during your grace
period. You are in the grace
period after you are out of school
but before entering repayment,
which is usually 6 months after
your graduation. If you conso
lidate during your grace period
you can usually qualify for a
lower interest rate.

* The federal government recently
passed a law that allows borro
wers to consolidate their student
loans with any eligible FFELP
(Federal Family Education Loan
Program) lender. This means that
your choice of a lender is much broader now than it was in the past.

* The interest rate on a federal consolidation loan is set according to federal law. It’s always to your benefit to get the lowest interest rate you can from a lender, but interest rates on federal consolidation loans are fixed for the life of the loan and can’t exceed 8.25%.

[Pullout: Student Loan Consolidation Tips]

* If you have a mix of federal and private student loans, don’t combine them into one consolidation loan. You will lose the federal benefits inherent in your federal loans. These federal benefits include not only the 8.25% interest cap, but deferment and forbearance options that you can use if you fall upon difficult economic times.

* The Higher Education Act specifically requires that federal student loan consolidations must have fixed interest rates, no fees to process or approve the loan, go through no credit checks, have no prepayment penalties and get a lower interest rate if you consolidate during your grace period.