Act NOW To Save On Student Loans

Lots of college graduates are heading out into the real world under a real black cloud by carrying lots of student loan debt.

The Early Show financial expert Ray Martin says they can still lock in at a low interest rate to pay that debt off, but only if they act right away.

The national average of all loans grads take with them from campus is $19,200, according to the Education Department.

"You go through school," Martin explained to co-anchor Rene Syler Wednesday, "four years of college, and you cobble together how to pay for it with four to seven different loans. … At the end of that, you've got to start repaying them.

"There's a transaction called loan consolidation where you can take one loan out for the amount of all of those little loans, wrap it all into one loan, and make one payment to one provider.

"The benefits of that are, it's simple, so you're not trying to pay multiple payments and missing on any of them. You save money, because you can lock in a low interest rate that I know is going to rise in July, so this should be National Student Loan Consolidation Month right here! And you lock in certainty: Your payment will never change on a loan consolidation loan."

But, stressed Martin, time is of the essence.

"If you're a current student and you have loans or you're a graduated student and you have loans, you have got to look at loan consolidation now, before June 30," he said. "That's because the interest rate that you'll get on a consolidation loan now is going to be the rate of all your student loan rates. And, in July, the rate on all your student loans is going to go up by almost 2 percentage points. If you consolidate after July 1, you're going to pay 2 percentage points more. You're going to pay more money. It saves you money now to do this now."

Two percent may not sound like much, Martin said, but it adds up over time.Using a loan amount of $10,000 to be repaid over 10 years, to keep the math simple, Martin said: "You can lock in now, if you consolidate loans before June 30, at around 4.75 percent if you have Stafford loans. If you wait until after June 30, that rate is going to be almost two percentage points higher. The difference in the monthly payment is going to be $20 more, from $210 to $230. Over the life of the loan, you're going to pay $2,300 more in interest on $10,000 if you wait. If you do it now, you'll save $2,300. And this is just on $10,000 over a 10-year repay."

That could mean $23,000 less in interest paid if you leave school with $100,000 in student loans, Martin said.

He adds that current students also qualify.

"There is a once in a lifetime opportunity for students currently enrolled," he said. "They need to look at their Stafford loan eligibility now. If they borrow on a Stafford loan now, they get a low, variable rate. As of July 1, they're going to pay 6.8 percent fixed on a Stafford loan, two points higher. They can also consolidate all their loans while they're in school, while they're actively enrolled. They take the loans and consolidate those and lock in the low interest rate. And still stay on deferred status. So, you have a double play here, max out your Stafford loan eligibility before June 30, and consolidate all those loans before June 30, while actively enrolled."

Once someone decides to consolidate, who should they pick a provider?

"If you go to Google and type in 'student loan consolidation,' you get 40-and-a-half million hits," Martin said. "So, go with the lenders you currently have. If you have seven loans with five providers, shop each provider. They all have to offer the same low, fixed rate on your consolidation loan.

"But look one level deeper. Incentives. Sallie Mae will offer you one percent off your interest rate if you make 36 payments on time. Others will knock a quarter- or half-a-point off if you sign up for direct debit. If you have a large amount of loans, you get even a better deal. Shop each one on the incentives, because they can save you hundreds of thousands of dollars, as well. Shop around.

"And again, the key is to do all this this month: If you wait 'till after that, it's too late."