If you borrowed money for college - you may want to read to this. A June 30th deadline is looming and if you miss it, it could cost you.
The average college student now faces $20,000 in debt on graduation day. Come July 1st, rates will jump almost two percentage points. So it's best to consolidate now.
"If you can save two-to-three percent over a 15 or 20 year time period that's going to be huge," Paul Blake, Associate Director of Financial Aid at Texas Tech, said.
Blake says interest rates for federal student loans will leap almost two-percentage points on July 1st, rising to a-little-more than 7%, their highest levels in six years, but you can consolidate now at as low as 4.75%.
"Consolidation allows them to lock in their loans at a set interest for the life of the repayment," Blake said.
Everyone with a federal student loan is eligible for the consolidation.
"Even if you're not close to graduation at least you can secure some of that loan debt at a good rate," Blake said.
But be mindful, if you do so, you will lose the six-month grace period after graduation.
"However, the benefits of locking in at the rate it is now is going to far-out weigh what interest would have been paid for during that grace period by the federal government," Blake said.
Now, thanks to a regulation change, students can now shop around for the lender offering the best consolidation rate, but Blake recommends you first check with your original lender or loan holder.
"Talk to them first, they don't want to lose your business. And if you go with someone else they're going to have to sell that loan and they'll lose money. So they're going to offer you the very best deal," Blake said.
Financial advisors also suggest setting up your payments on an automatic payment every month. That alone may drop your rate a quarter point. And if you make your payments perfectly for two years or three years they sometimes drop your rate even more.
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