If you have variable rate student loans, mark July 1, 2008 on your calendar. After that date, you can lock in interest rates 3 percentage points lower than what’s available now. I’m not eligible for lowering the rates on my student loans because I’ve already consolidated and I have no new student loans to add into the mix. But if you haven’t consolidated yet, you may be able to benefit from rates as low as 3.62%.

I have about $11,000 left to pay on my student loans at 4.25%. As savings interest rates have decreased recently, I’ve been increasing the amount I’ve been paying to eliminate this debt. This loan is the only debt I have that requires interest payments, and I’ll be happy to pay it off.

Earlier this month I sent $750 to student loan repayment. That payment is up from $500 the month before, $250 earlier this year, and about $150 earlier than that. In July, I’ll either maintain my $750 payment or increase the amount to $1,000 depending on my June financial results.

Update! There are a lot of questions being asked already, so here are some details.

• Since many lenders no longer perform student loan consolidation, you may be better off starting your search with the U.S. Department of Education who will.
• Only variable-rate student loans are eligible. All student loans initiated after July 1, 2006 are fixed-rate loans, so these loans will not qualify for the lower interest rate, but you can still consolidate multiple loans to reduce your number of payments, your minimum due, and extend your total repayment duration.
• If you’re still in school, you are not eligible for the lowest rate. If you’re in the six-month grace period, you can receive the lowest interest rate on the loans that are over two years old (usually from your freshman and sophomore years). If you’ve waived your grace period you’ll only qualify for a higher rate.
• If you’ve already consolidated your student loans, you won’t qualify for the lowest rate.

Note: The Department of Education’s loan consolidation application will not indicate the new, low interest rate until July 1. Consolidation applications are on hold until that time.

3.6% student loans: Consolidate now, Liz Pulliam Weston, MSN Money, June 23, 2008.

If you have a loan serviced by Sallie Mae, there is a good chance that your FICO credit score dropped significantly recently. Consumers have identified an error in Sallie Mae’s reporting. Accounts in good standing have been flagged and notated with the wording, “Arrangements made with credit grantor to make partial payments.” Sallie Mae is reporting the your loan balance is fully due immediately and that your payments are behind more than 60 days.

This reporting error has caused FICO scores to drop about 150 points. This can be a pricey error for anyone planning to close on a mortgage. As of now, the error is isolated with Equifax, but Experian and Transunion may be affected as well.

If you have a loan with Sallie Mae, particularly if you opted for a “graduated payment plan” in which your total payments increase over time, I suggest taking advantage of your free annual credit report from Equifax right away and disputing any incorrect record.

Also contact Sallie Mae at 888-272-5543 if you believe they are reporting your loan information incorrectly.

May 14, 2008 Update. This story has been picked up by BusinessWeek and the Pittsburgh Post-Gazette. The problem at Sallie Mae affected an estimated one million customers. BankRate provides this information:

Sallie Mae is working with Equifax to correct borrowers’ credit reports. Credit scores should return to their standings before the drop within “the next day or so,” and any erroneous delinquencies resulting from the misinformation should be removed from the borrowers’ Equifax credit reports… All credit reporting agencies have been notified of the issue and consumers do not need to pull their credit reports if they have not already done so, nor do they need to dispute the error with the credit bureaus… They should call Sallie Mae directly.

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