Wait to Consolidate....

Posted by andres.valenzuela on Thursday March 20, 2008

"When it was first introduced in the mid-1980s, student loan consolidation was touted as a much-needed solution for those struggling to pay their debts from college. Borrowers could combine their Stafford and Plus loans into one payment and lock in the prevailing interest rate - typically, one lower than the average rates that they were previously paying on their other loans," SmartMoney reports. "Times have changed, however, and consolidation is no longer the cheap and attractive option that it used to be. Thanks to the declining federal funds rate and the phasing out of variable-rate loans, consolidating your student loans now will actually cost you more over the lifetime of the loan. Eventually, consolidation will come back into fashion for variable-rate loans (rates should be much more attractive when they reset in July). But it will probably never again be the least-expensive solution for those with fixed-rate loans."

You can read the complete March 19, 2008 SmartMoney article on-line.

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