Congratulations, You’re In Debt!
You just completed college and have your degree in hand, you’ve accepted the job offer and are planning to begin work in July or August, after a much needed break. Soon, you’ll be putting on your best clothes, heading off to work, and beginning the climb up the corporate ladder.
You’ll also be expected to start paying back your student loans no later than six months after graduation.
Yes, it is that time of year again — grad season, but also debt review time. If things worked out well, you have little to no debt to deal with. However, if you are in that vast group of middle class borrowers — too rich to qualify for aid, too poor to pay for education completely — then you’re possibly looking at paying off tens of thousands of dollars in student loans over the next twenty years.
Should You Consolidate Your Student Loans?
One way grads are looking to reduce their costs is by consolidating their student loans. In some cases you may benefit from consolidation, while in other cases you will not.
Changes made by the U.S. Congress a few years ago will determine what is the best course of action for you to take. Specifically, if your loan(s) originated prior to July 1, 2006, then you could benefit from consolidation, while loans originating after that date probably won’t. The key difference for these dates is the interest rate, which Congress established for Stafford and PLUS loans for the later loans. These newer loans must have a fixed interest rate while earlier loans do not.
Perhaps you have both kind of loans. In that case, you may still benefit from consolidation.
Why You Should Think About Your Student Loans Now
Since you just graduated, you may not be in the mood to look at your student loan contracts now. After all, the beach beckons and that new job takes precedence, right?
Not so fast!
July 1st looms as an important date in the student loan calendar because that is when the rate for federal student loans changes next. Based on a formula derived from the May treasury auction, the new rate will kick in. Of course, the rate change applies only to earlier loans as the newer loan rates will stay fixed.
Just One Chance To Consolidate
You will only be able to consolidate your student loans once. If you have variable and fixed loans, you’d probably be better off consolidating the variable rate loans only. Right now, rates are at some of their lowest levels ever, so explore your options carefully — you could save thousands of dollars over the life of the loan.
In conclusion, ignore the bright sun and warm weather and pull out your student loan documentation today. The links which follow will give you more information about the steps you should take next.
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