<p>Stafford and other federal guaranteed loan rates are expected to rise substantially to about 5% on July 1. Feds will now allow students currently in school to consolidate their loans at the current fixed rate (S's has a 2.875 locked rate before applying a .75 rebate). On the positive side, you lock in rates now. On the negative, student loses grace period and payments could start now. The loss of grace period would apply to those just graduating. Continuing undergrad or grad students can defer loan repayment and feds still pay the subsidized interest during deferment period.</p>
<p><a href="http://www.madison.com/wsj/home/local/index.php?ntid=41701&ntpid=4%5B/url%5D">http://www.madison.com/wsj/home/local/index.php?ntid=41701&ntpid=4</a></p>
<p>This change has sparked our S to decide on consolidating his first 2 years of Stafford loans he took out for law school, rather than waiting until after graduation next year. FYI - Talk to your lender(s). Most have posted this info on their websites.</p>
<p>From what reading I have done on this, it appears that the only downside for a current student to consolidating his/her loans is that they would be giving up the 6 month grace period subsequent to graduation. Am I reading that correctly? If so, that seems like a small price to pay for a locked in low rate for the life of the loan. Yet, the site that was linked above indicated that current students may not want to consolidate. I don't get it.</p>
<p>Sorry to be so uninformed here, but how does this work? Does it work for Perkins loans? I looked up a couple of my son's Perkins' loans, and they are 5% Should we do something with them? If so, what exactly do we do? (He is graduating this month.)</p>
<p>Thanks!</p>
<p>When you consolidate, you consolidate all loans and you lock them in at the then weighted average interest rate. My advice to graduating students is to consolidate (ABSOLUTELY), unless you are looking at a career in which the Perkins cancellation provisions would be helpful. </p>
<p>For current students, it is not so clear. Consolidation may create more problems than it solves (vis-a-vis the grace period issue). </p>
<p>Anyway, take a look at my blog for a more in-depth discussion.</p>