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Published June 26, 2006

Students, lock in lower loan rates now

If you have a federal student loan, this week is your last chance to lock in lower rates through consolidation.

Interest rates will jump nearly 2 percentage points Saturday, affecting all adjustable-rate Stafford and PLUS loans. You can get ahead of the curve by consolidating as long as you have at least one loan that has not been through the process.

Students in school can consolidate but will not have to begin repayment if they remain enrolled at least half time. Some lenders, including Sallie Mae are not permitting their borrowers who are in school to consolidate with any other lender. Consolidation does not affect the subsidy on a Stafford loan.

Expect to see a marketing blitz this week by lenders trying to get the word out. While all lenders charge the same basic rates, there are differences in the incentives offered.

Saturday marks the beginning of a new era in the student loan program. Instead of adjustable rates, new loans will be at fixed rates: 6.8 percent for Stafford loans and 8.5 percent for PLUS loans. In addition, in-school consolidation will no longer be an option.