The Right Time to Consolidate Student Loans

Anytime is a great to consolidate student loans if your goal is to reduce monthly payments, increase cash flow, and lock in a fixed interest rate. However, there are a few windows of opportunity that can increase cost savings even more:

Consolidate student loans during the grace period

When you consolidate student loans during the 6-month post graduation grace period, you’ll take advantage of one of the biggest money saving opportunities available. During this grace period, the interest rates are approximately .60% lower than when the loan moves into repayment status. The interest rate you receive when you consolidate student loans is dependant on the current government rate on the loan. When you consolidate student loans during this short window of time you lock in an incredibly low rate for the next 10-30 years of repayment.

When to apply to consolidate student loans

It can take several months to process an application to consolidate student loans.It’s important to apply as early as possible to ensure that the process is complete by the time your grace period ends.Applying to consolidate student loans onlinecan greatly reduce the amount of time to process the loan. Most borrowers who apply online with ScholarPoint have their loans processed within a week as opposed to several months. You won’t lose the benefit of the grace period if you apply to consolidate student loans early. On the application you’ll be able to designate when you’d like the loan repayment to begin.

Consolidate Student Loans by June 30th 2006 to lock in today’s lower rates

Every July 1st, the government resets the student loan interest rates.As in any market, sometimes interest rates are more favorable than during other times. In 2006, rates will be significantly higher than in 2005. The increase is part of a plan to reduce the rising national deficit by increasing the amount of interest paid back on student loans. If you don’t get to consolidate student loans by June 30th 2006, it’s still important to consolidate early. Rates in coming years are expected to remain higher than they have been in the recent past.

July 1st changes will cut several consolidation benefits

If you are still in school, or are married and want to consolidate student loans with your spouse, or want to refinance a previously consolidated student loan, the time to consolidate is by June 30th, 2006. Part of the new federal laws will either eliminate or reduce benefits in all of these situations. The opportunity to consolidate student loans for those in school or who are married will no longer be an option as of July 1st. Those who wish to consolidate student loans a second time will be limited in their options.

If you’ve missed either of these windows, you’ll still save money on your monthly payments

The benefit when you consolidate student loans is that you can leverage time and a fixed interest rate to enjoy a much lower monthly payment. When you consolidate student loans, all of the outstanding loans are paid off and replaced with one fixed rate loan and a repayment period as long as 30 years. This combination of factors can reduce a monthly student loan payment by more than 60%.

Increase monthly cash flow when you need it most

Most people directly out of school and just starting careers need the benefit of a low monthly payment. When you consolidate student loans, you can easily improve your monthly cash flow by lowering your student loan payment. As your level of income grows, you can choose make larger payments to cut down on the years of repayment without any additional penalties.

Reduce open loans before applying for major credit purchases

Another great time to consolidate student loans is before applying for credit on major purchases like a home or car. A student who takes out just one subsidized and one unsubsidized student loan every semester will end college with 16 open loans on their credit report. All of these open loans can negatively impact your credit rating, causing you to pay higher interest on new lines of credit. By consolidating student loans, you will close all of these open loans and replace them with a single, fixed interest rate loan.