• Should I consolidate my student loans?

• Answer:  Variable rates are just that--variable. They go up or down each year based on the Treasury-bill rate. The variable rates on most student loans are reset every July to match the 91-day Treasury-bill rate set in the last auction in May, plus a factor. When you consolidate, you combine all your student loans into one fixed rate loan and “lock in” the new interest rate. Your new, fixed interest rate will be the weighted average of your underlying loans rounded up to the nearest one-eighth of a percent. Consolidation makes sense when your new loan results in lower monthly payments over the same repayment term. Previously consolidated loans are generally not eligible. If you consolidate, be sure to seek as short a payback period as possible—certainly no longer than ten years— and be sure that there is no penalty for pre-payment. Also, select a level repayment plan where each payment includes both interest and principal. The money that is saved as a result of the new monthly payment amount should be used to reduce principal. Often, you can obtain additional discounts if you sign up for automatic withdrawal for your student loan payments (EFTs). Consolidation does not make sense when you have only a few years remaining on your loans because the new loan would cost more in interest over time. Also, be sure to inquire whether consolidation would void any benefits or privileges you now have, such as cancellation, deferment or any life/disability insurance.

Borrowers who did not consolidate prior to the July 1, 2005, rate increase should bear in mind that the current rate is actually lower than the historic average interest rate for the past 10 years. The average rate has been around 7% over the last 10 years, which is still higher than what most borrowers can lock in today. In addition, borrowers may also be able to receive the benefit of interest rate reductions for on-time payments and/or electronic payments. Shop around to see whether it makes sense for you to consolidate. Ms. Lolita Lugo of Goal Financial is willing to work with Project MedSend inquirers to determine whether consolidation is appropriate. You can contact Ms. Lugo at 888/696-5867 ext. 5213.

 

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"To develop funding to repay educational loans for healthcare workers as they minister among the underserved at home and abroad. "

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