There are several reasons to consolidate immediately upon graduation.  Consolidation does two things.  It fixes the interest rate and it increases the term or months to repay the loan which decreases the monthly payment.  A student with $20,000 in loans can reduce the monthly payment from $228 per month to $150.  Students with variable interest rate loans who consolidate while in their grace period can reduce the repayment interest rate by .06 %.  Additionally there are no prepayment penalties.

The law requires the consolidation rate be set by calculating the weighted average of the rate of all existing loans. Students graduating this spring with loans from the prior 4 years will most likely have four loans. Three loans will be at a variable interest rate of 6.54% with an 8.25% cap and one loan at the new fixed rate of 6.8%.  A student will typically take out $20,000 in loans in four years.  In this scenario, the consolidated rate will be around 6.6% fixed.

The important thing to remember when shopping for a lender is that the interest rate is set by the government.  Borrowers should look for lenders with the best borrower incentives that further reduce the federal rate. Most lenders offer a �% reduction for auto debit. Some lenders are more aggressive with an additional �% to 1% off for a certain amount of on time repayments. Some offer a monthly grace period. 

�A monthly grace period on incentives is crucial� says Montiel �Collegiate Funding offers a �% reduction for auto debit, 1% reduction after 36 months of on time payments, and a 15 day grace period each month to insure they meet the requirement.� 

Indicators point to a slight rate increase on July 1, 2007 for loans with a variable rate, so students should consolidate prior to this date.  Don�t be confused with recent press regarding new student loan rates going down. If this law passes it will help future students but will not affect students who currently have loans.

The facts on student loan consolidation are simple.  �Consolidate when you graduate, prior to July 1, 2007 and prior to the end of your grace period to insure the best rate� said Montiel. Look for a trusted company with knowledgeable advisors and a comprehensive borrower incentive program.