Lock In, Or Lose Out
Special Report: Lock In, Or Lose Out
"If I didn’t consolidate, the payments were going to be huge. Pretty much double what they are," Suffolk University grad Ken Korzeniowski said.
Korzeniowski learned an important lesson, but not in the classroom. He just consolidated $36,000 in federal school loans and now his savings are adding up.
"I'm trying to get a house now, trying to get a new car and all those things are going to add up," Korzeniowski said.
Korzeniowski is taking advantage of today's low interest rates on federal consolidation loans.
Right now, it's at 2.875 percent, its pretty cheap money. But on Friday, July 1, that interest rate will be history, skyrocketing to 5.3 percent, almost doubling.
"It is the largest increase in the interest rate for guaranteed federal student loans in 40 years," Northeastern Dean of Financial Aid Seamus Harreys said.
Here's how much you can save: If you have $20,000 in federal loans, a consolidation loan at today's low rate will cost $192 per month, over 10 years with total loan payoff of $23,040.
If you consolidate the same amount after June 30, monthly payments will increase to $215, making the total payoff $25,800. Almost $3,000 more, and the more you owe, the more you save.
The phones are ringing off the hook at one local lender.
"The rush is on to get this done ASAP, don't delay," Katie Dexter of studentloanconsolidator.com said.
Many students are anxious, because there's a move in Congress that could stop loan consolidation all together next year.
"You have to lock in while we still can," Northeastern Student Bill Durkin said.
If you do consolidate, beware: all loans are not the same. Some will eliminate your six-month grace period. This happens after graduation, when a lender allows you six months to find a job before making monthly payments.
"My payment is so much less now, that it really isn't a big deal to me," Northeastern student Nicole Amato said.
If you are in school, tell the lender you want a student deferment. That way, you won't start paying it back until after you leave school.
And make sure to read the fine print. Some loans start accruing interest even if you're in school, on deferment.
"You want to make sure you ask that question ‘what type of loan do I have? Is there any interest accruing while I'm in school?’" Harreys said.
It's an education that could pay dividends for years.
It's free to apply for a federal consolidation loan. The experts say call the school's financial aid office. They should be able to tell you all the information you need to consolidate your finances.
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