Consolidating school loans can save big bucks

Wed., May 10, 2006

David Uffington King Features Syndicate

If you’re about to graduate from college and plan to consolidate your student loans, mark July 1 on your calendar. That’s the day interest rates are expected to rise. Education loan consolidation, if you get the right plan, can save you significant money.

You’ll likely end up with a mailbox full of consolidation offers. Don’t take the first one you get. Here are some things to consider:

•Check to see who’s sending that offer. Is it really from the federal government, or is it a marketing ploy in an official-looking envelope?

•Make sure the lender is eligible. If you have PLUS or Stafford loans, go back to your lender to talk about consolidation.

•Know what types of loans you have — Perkins, HPSL, HEAL or other — because not all can be consolidated together.

•Read the fine print for the costs of the consolidation. A lender can’t charge you a fee to consolidate. Make sure you understand what you’ll be paying over the life of the loan.

•Don’t fall for the panic some lenders might try to instill with earlier deadlines. You still have time to decide.

•As with credit cards, some lenders will offer a great low rate — until the first time you’re late with a payment and the balance of your loan will be paid back at a much higher rate. At the same time, is there a penalty for early repayment?

•What will you actually save by going with a particular lender? Check any potential loan with an online calculator at www.smartloan.com.

•While it might be tempting to stretch out your payments for 30 years, as some lenders will allow, consider what else you’ll want to do in the next 30 years. Your credit availability will be impacted if you’re still paying off student loans. At the same time, be realistic about what you can pay back.

•Get the advice of your school’s financial-aid office. It can steer you toward a lender with a good reputation, one that’s been in the educational loan business for a long time.

•SLM Corporation, also known as Sallie Mae, the leading lender for educational funding, can offer advice. Check www.salliemae.com for information for graduates and parents. Type “consolidate” in the search box, or call 1-888-272-5543.

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