Federal Loan Consolidation

As of July 1st 2006, first time Stafford borrowers will receive a 6.8% fixed interest rate. All students with existing Stafford loans borrowed prior to July 1st, 2006 will continue to have a variable rate stafford loan. Variable interest rate loans are expected to rise to 7.14% and interest rates on parent loans are expected to rise to 7.8%. Stafford borrowers who consolidate their outstanding loans before July 1st would be eligible to lock in an interest rate as low as 4.75%. Parent borrowers who consolidate before July 1st would be eligible to lock in a rate as low as 6.1% over the life of their loan.

While consolidation can help you get a lower interest rate and lower monthly payments, there can also be some disadvantages. Many consolidation loans lower your monthly payments by extending the amount of time you have to repay the loan, costing you more in interest in the long run. You may also lose rights to certain deferments if you consolidate. A deferment is a period of time during which the holder of your loan suspends your normal loan payments. Another advantage you may lose is any type of repayment benefits you currently have with your Stafford Loan. These are things like interest rate or principal reductions you may have earned automatically or by attaining certain repayment goals.

Late Breaking News on Loan Consolidation
Last night the President signed The Emergency Supplemental Appropriations Act 2006, H.R. 4939. This bill repeals the Single Lender Rule in student loan consolidation. In the past, students who only had federal loans with one lender had to attempt to consolidate with that lender. They did not have the option of choosing another lending institution for consolidation. As a result of this new bill, students will now have the choice to consolidate with the lender of their choice. The July 1 st deadline to consolidate at the current rate is approaching quickly. Many students will receive emails, mailings and maybe even calls from lenders urging them to consolidate with their company. Make sure to get all the details from each lender in order to make an informed decision.

To apply for a Federal Consolidation Loan you must be in repayment or in a grace period. You may still be able to consolidate if you are in school, but it may force you into immediate repayment. Consolidation while in school is not something we are suggesting.

To get more information or to apply consolidation, please contact one of our preferred lenders:

Loan Consolidation - Pros & Cons

Pros	Cons
Fixed interest rate You save money if you consolidate while variable interest rates are low.	Fixed interest rate Variable interest rates change annually. Therefore, if you consolidate your loans and the interest rates drop the following year, you have "locked" into the higher interest rate for the life of the loan.
Repayment *Single Payment* - If you have loans with multiple lenders/holders, you send a monthly payment to each. However, if you consolidate all those loans, you make a single payment. *Lower Monthly Payment* - Consolidation loan monthly payments are lower because the repayment period is longer.	Repayment *Fewer Options* - Your Consolidation loan may have fewer deferment options than your original loans, also, cancellation and forgiveness options may be affected (check with you lender). *More Interest Paid* - With a longer repayment period you end up paying more interest over the life of the loan.
What Else *Manage Monthly Budget* - Savings from reduced monthly payments allows you to pay other monthly bills with higher interest rates, such as credit cards, etc. *Remove Loans From Default Status* - After making satisfactory repayment arrangements with the holder of your loans in default, you can consolidate those loans and reinstate benefits (deferments, eligibility to apply for financial aid, etc.) that were lost when your loans were placed in default. *No Extra Costs* - There are no application or processing fees and there are no prepayment penalties.	What Else *Loss of Payment Incentives* - You may forfeit any payment incentives/discounts you are currently receiving (check with your lender). *Loss of Grace Period* - After you graduate you have a six-month grace period before starting repayment, if you consolidate those loans you begin repayment once the consolidation is completed. *No Reconsolidation* - Once you consolidate your loans, you cannot "reconsolidate" that loan. You can apply for another consolidation loan if you have new loans to consolidate.

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