July 1 Is “Magic Date” For Student Loan Consolidation

Declining interest rates are probably going to be good news for folks who have variable-rate Stafford student loans. The May 2008 issue of Kiplinger’s notes that the rates will adjust on July 1, 1008—and are likely to look pretty good:

[T]he rate . . . could drop by as many as three percentage points, to 4.25%. You can lock in the new rate by waiting until July 1 and then consolidating your loans into a single loan with a fixed rate.

This is only going to apply if your Stafford loans are from before July 2006. In July 2006, a new law came down that set a fixed rate for Stafford loans of 6.8%. The law also said that folks who were still in school could not consolidate their loans until they graduated. If you have some variable-rate and some fixed-rate Stafford loans, you can’t do anything about the fixed rates; and Kiplinger’s suggests just consolidating the variable-rate loans. And if you’ve consolidated your student loans in the past, you’re out of luck. You can’t consolidate more than once (unless you have taken out new student loans).

For the full read, check out the May 2008 issue of Kiplinger’s. (It was not yet available online at the time of this post.)