I spent the last 45 minutes or so consolidating my student loans. I’m a graduate student, working on my Master of Business Administration degree from the University of Phoenix Online. Even though I have these loans, they get paid off as soon as I receive my reimbursement check from my company. However, when I first started the program, I used some of my reimbursement to pay off my higher-interest undergraduate loan.
In any case, I have under $12,000 in student loan debt, even though I won’t have to pay most of that. The two loans totaling that amount have an interest rate of 2.77%. If I didn’t do anything, the rate would probably jump to above 4.0% on July 1. That is the date that variable-interest student loans make their adjustment every year. It’s almost guaranteed that these rates will go up.
If you consolidate now, you can lock in your lower variable rates. In most cases, the consolidating bank will determine the weighted average of your interest rates and round up to the nearest quarter point in order to determine the interest rate for the new loan.
I will end up with an interest rate of 2.875% if everything goes according to plan; this is still much less than what the rate would most likely be if I do not consolidate.
The process of consolidation was much easier than I expected. First, I took a look at Affiliated Computer Service’s website, the company that services my current loans. They had some forms that required filling out and sending in. I decided I didn’t want to go through that trouble, because I tend to be impatient and want things processed immediately. Printing out and sending in Adobe Acrobat forms downloaded from a website is so 1997.
I called the customer service line. After about ten minutes on hold, I got in touch with someone. They gave me the number I had to call for College Loan Corporation, the group that owns my loan. I called and waited for another five minutes.
When Brad picked up the line, he informed me that the service is completely automated. He took my information and told me I should expect the forms through email within five minutes. They were there within two, and I proceeded to complete the application online.
The process was painless. The new loan will continue to be deferred while I am taking classes, which is an unexpected bonus. If you have student loans, consolidate now. There are only a few days left before the interest rates increase.
Updated February 6, 2012 and originally published June 20, 2005. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.