Deadline looms for student loan consolidation

Time is ticking away for those wanting to make the student loan consolidation deadline this Friday. Beginning Saturday, those who haven’t consolidated will see an increase of slightly less than 2 percentage points in the interest rate on the loans they are accumulating or paying off.

The new rate will be 6.54 percent for students who are in school and for those in deferment or in the grace period. For those currently in repayment, the rate will be 7.14 percent.

“The most important thing is that they do it,” said Mark Oleson, director of the Office of Financial Success at MU. “The primary benefit is just to lock in the rate.”

Once consolidated, the interest rate will remain constant unless people decide to borrow again for school.

Consolidation is not for everyone, Oleson said; in some cases, it may be a better option to wait or to opt out of consolidation altogether.

He said there are three common reasons someone might choose not to consolidate:

• If they have a certain type of federal loan and aren’t eligible for consolidation.
• If they’re in a situation in which the loan is forgivable. In that case, consolidation could result in a loss of key benefits promised under the original deal.
• If they think, for whatever reason, that the rates will decrease in the next year or two. However, Oleson said a drop in interest rates seems highly unlikely at this point. “That’s not going to happen in the short term,” he said.

Also, students might not want to consolidate if they’ve just graduated and don’t want to start paying off their loans right away.

Oleson said one of the most common misconceptions among students that have consolidated their loans is that they can’t consolidate again. A good way for students to keep open the option of reconsolidating is to leave out one loan during the process.

Oleson advised students seeking consolidation to proceed with caution, in particular if lenders offer to consolidate something other than student loan debts, such as credit cards. The focus at this point in time should be on specifically consolidating any student loans affected by the deadline.