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news:
Financial freedom
as lower loans offered
By Priscilla Gutierrez
Summer On-line Forty-Niner
Graduation has
come and gone and graduates with outstanding student loans
only have six months before the interest goes up and the required
payments begin. What many may not know is that there may be
a way for them to reduce their monthly payments.
Graduating students
and parents have the opportunity to consolidate their student
loans at a fixed rate of interest that may be as low as 5.5
percent for students and 6.875 percent for parents, according
to the Student Loan Consolidation Center. Students in
repayment typically paid an 8.25 percent interest rate this
past year.
Interest rates
will be substantially lower beginning July 1 due to action
taken by the Federal Reserve in lowering interest rates, said
Dean Kulju, director of financial aid at Cal State Long Beach.
With the recent
interest rates at a low, there is a possibility for students
to reduce their monthly payments by 40 to 50 percent or more
by taking advantage of the student loan consolidation extended
term provision.
Loan consolidation
combines several student or parent loans into a larger loan
by a single lender and the payments are combined to a single
balance. The amount of the monthly payment is reduced by extending
the term of the loan for up to 30 years, similar to financing
a home loan.
Students considering
consolidating their loans should keep in mind that the reduced
monthly payment may not be worth it in the long run, according
to Kulju. Since they will be making payments for a longer
period of time, the total amount of interest they pay will
increase.
"The potential
savings are definitely there," Kulju said. "But
it's generally more appropriate for students that are getting
done with school and not planning on taking out any loans
in the future."
Students that have
graduated or are close to graduating may want to consider
consolidating their loans if they have borrowed from several
educational loan programs or lenders, if they have large debts
or if they have other large expenses and need to lower their
student loan payment, according to Kulju.
Students should
have their loan history together and contact their lender
to see if loan consolidation would be appropriate for them,
Kulju said.
"It can be
a very good option for some students," Kulju said. "But
if a student hasn't borrowed or has very little to pay, it
might not make sense for them."
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