Consolidate to lock in lower student-loan rates
Consolidate to lock in lower student-loan rates

By Barry Armstrong / Money Matters
Tuesday, August 11, 2009 - Updated 6d 14h ago

Should I consolidate my student loans due to the new interest rates?

There are new interest rates for variable federal Stafford and PLUS loans issued between July 1, 1998 and July 1, 2006. The new rates for Stafford Loans are 2.48 percent (down from 4.21 percent) for loans that are being repayed and 1.88 percent (down from 3.61 percent) for loans that have a grace period or are deferred or are for students still in school. PLUS loans have dropped to 3.25 percent from 5.01 percent.

Borrowers with variable-rate federal student loans can lock in the current variable rate on their loans by consolidating them. The interest rate on a consolidation loan is a fixed rate that is equal to the weighted average of the current applicable interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a point.

If you consolidate now and rates drop even lower, can you consolidate again down the road?

Borrowers can only consolidate once. If they’ve done so previously, they will not be able to take advantage of the new low rates. Also, private student loans cannot be included in a federal consolidation loan.

If you are interested in consolidating your federal student loans, you can go through the Federal Direct Loan Consolidation program at

With this loan, you may qualify for flexible repayment terms. There are a variety of attractive repayment plans that you will have available to you.

E-mail questions to Barry Armstrong is the host of “Money Matters with Barry Armstrong” on WCRN-AM (830) and a registered representative with Securities America Inc.
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