For some with student loans, sitting tight is best
The Department of Education says there are 10.6 million Americans who have at least some federal education debt that could be consolidated. But not all of those can, or should, file the application.
- Most lenders won't bother with anyone who owes less than $5,000.
- Anyone who borrowed through the government's Perkins loan program probably shouldn't consolidate since he is already benefiting from that program's low 5 percent fixed rate.
- While current students can consolidate their loans, most financial aid counselors frown on the idea for underclassmen, since they'll lose the Stafford program's student deferral and will have to start making payments while in school.
- Married couples tempted to consolidate all of their student debts together should consider that if the marriage breaks up, they'll each still be responsible for the other's loans.
- Consolidation can void some loan forgiveness and interest rate discount programs. Those taking advantage of the Michigan Student First offer of interest-free loans, for example, would end up paying more if they consolidated.
For just about everyone else, though, consolidation is "highly recommended," says Greg Diamond, manager of consolidation for the Missouri Higher Education Loan Authority. But don't delay, Diamond advises. Last June, his 30-person staff was deluged with 30,000 phone calls from borrowers trying to get their applications in before 2005's low-interest-rate deadline. Since MOHELA has about 500,000 customers who haven't consolidated yet, this June could be far busier.