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TIMING IS EVERYTHING.

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Author: Lankford, Kimberly

Section: Your Money

Q&A

TIMING IS EVERYTHING


With interest rates likely to drop again, hold off on consolidating STUDENT LOANS.

Everyone seems to be recommending student-loan consolidation. But wouldn't it make sense to wait until July, when rates may be even lower than they are today?

The record-low rate for Stafford student loans--4.06%--has sparked a consolidation boom. But you're right that rates may fall still further The rate is based on the yield for the 91-day Treasury bill, plus a fixed margin. The T-bill was yielding 1.76% when the 4.06% rate was calculated last year; it was yielding 136% in mid April.

Because you can consolidate only once, if does make sense to delay your decision. it's not all guesswork, either. The July 1 rate wig be based on the Treasury-bill auction in late May, which means you'll know the new rate more than a month before it takes effect.

Most lenders work to ensure the best deal. Beginning May I, Collegiate Funding Services won*t process consolidation applications until the new rate is known. If the rate is headed down, your consolidation request will be put off until after July 1. Anyone who applies for consolidation through Sadie Mae in June will receive the better of the two rates.

Got a question? See page 6 for information on how to send it to us.

ILLUSTRATION (COLOR)

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By Kimberly Lankford


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