Consolidating Your Student Loans During Your Grace Period

One of the benefits of a federal student loan is that after graduation you are given a six month grace period before you are expected to make payments. If you graduated or dropped below half-time status this summer your grace period is most likely about to end and your lenders may have contacted you already with repayment information. So why is it important to consolidate your federal student loans before your grace period ends?

For loans taken out prior to July 1, 2006 your interest rate is kept at the lower in-school rate during the grace period, generally .6% lower. When you consolidate your federal student loans your base rate is determined by figuring the weighted average of the current interest rates on all of your federal loans. By consolidating during your grace period you will lock in that lower in-school rate saving. Even just a .6% reduction in the rate can save you thousands over the life of your loan.

You can even retain your grace period if you wish, your consolidation application is completed but is held until just before the grace period ends. This is a good way to plan ahead and make sure you don’t miss the lower rates. You don’t have to remember when your loan is due, we will do it for you! For further information contact a loan consolidation expert at Federal Education Services.

Loans taken out after July 1, 2006 currently do not have a lower in grace rate, they are at 6.8% and stay at this rate until consolidated or paid in full. For these loans consolidating during grace will not affect the interest rate but keep in mind that you are acruing interest on your loans while you are not making the payments, even in grace. It may still be in your best interest to give up your grace period and start making the payments right after graduation.