Time To Save On Student Loans

Ray Martin Explains How To Lock In A Low Rate Now

(CBS) 
How and Where to Consolidate
Since loan consolidation is allowed only once, you have to consider your options carefully. And even if you have only one loan, you can use consolidation just to lock in the low fixed rate.

To find out how this works, you have to first contact the companies that service your loans because the program requires that you work with their loan consolidation product first. If you have loans through several providers, although each should offer the interest rate set by the government rules, but their terms and other valuable discounts offered can vary. Some consolidation loan providers will offer to reduce your interest rate by over 1 percent after you make the first 36 payments on time. Others offer cash rebates for those who make the first six payments on time. Many providers offer to cut your rate by .25 percent if you sign up to auto-deduct loan payments from your bank account. There are no fees, credit checks or collateral required, so steer clear of any provider who states otherwise.

How Long To Repay?
There are generally four options offered under the Direct Consolidation Loan Program:

• Standard Repayment Plan: Allows a fixed monthly payment for a maximum of 10 years.
  
  
• Extended Repayment Plan: A fixed monthly payment ranging from 12 to 30 years, depending on the amount borrowed. The monthly payment will be smaller than the standard repayment plan, but you will pay more interest over the life of the loan.
  
  
• Graduated Repayment Plan: Monthly payments that start out lower, and increase every two years, with repayment required over 12 to 30 years, depending on the amount borrowed. The monthly payment for the first 24 months will be even smaller, and will increase as your income increases. You will pay even more interest over the life of the loan versus the extended repayment plan.
  
  
• Income Contingent Repayment Plan: Monthly payments are based on the borrower’s income, family size, total loan amount and can be repaid over up to 25 years.