Rushing to consolidate loans can be a wise decision for many graduating students, but doing your own research is important.
The U.S. Department of Education said students should consolidate payments two months before the grace period ends.
"When you are a student, the best time to start paying back on loans is during the fourth month of the grace period," officials said. "If you consolidate early, then you will lose your grace period."
Jamie Appling, a junior journalism major, said she's interested in the options available to her on the issue of loan consolidation .
"I have a direct loan from the federal government and I have a previous private loan," she said. "Right now, I have not done any consolidation, but I should."
According to the U.S. Department of Education, you can consolidate loans in three different ways-by paper, by the Internet, or by phone.
"You can only consolidate by phone if all your loans are direct loans," officials said. "We charge no loan fees while some consolidation programs do."
Paying off lenders can become a hassle but consolidating it to one payment plan makes it easier. You can consolidate while in school, but as soon as you graduate, you will start to pay back.
Students get a lot of solicitation from private consolidating companies through mail, but the U.S. Department of Education suggests that you should shop around before you pick a program.
"So many students think that they are stuck with a consolidation program, but they aren't. They can choose to consolidate with another company if they don't like the services given," officials said. "Take time to read the documentations thoroughly."
According to the U.S. Department of Education, there are no penalties for early payment going through the Federal Direct Loan Consolidation department and you can lock in a fixed interest rate before July 1. The officials said they usually announce the increase in May.
Richard Ritzman, the director of The University of Memphis financial aid department, said in a previous interview that by law, the interest rate could not be raised but once every year on July 1. This year, interest rates increased to 2 percent on July 1. Interest rates for Federal Direct Stafford Loans jumped to 4.7 percent for students in college and 5.3 percent for students after college.
Variable interest rates for loans will not exceed 8.25 percent for direct subsidized and unsubsidized loans, according to Ritzman. If you have a fixed interest rate on your account the interest will remain the same throughout the life of the loan(s).
With this in mind, students tend to venture out to private consolidation companies, according to one U of M student.
"I've been getting a lot of mail from private consolidating companies," said Lee Vichathep, a senior Spanish major. "I don't know if the school prefers you to do it this way or the other way."
One Federal Direct Loan counselor said that with private loans, they usually turn a profit by increased interest rates over a period of time.
"It's usually best to stay with our program (the Federal Direct Loan services), but it's whatever you feel comfortable with," said Anthony Cercon, a direct loan counselor. "With our program, it's tax deductible, so you can profit from this," he said.
For students who need to check federal loan balances, they may call the federal tracking number at 1-800-433-3243.
