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Consolidating Student Loans Now Will Save on Interest, (from USA TODAY, December 23, 2005)

If you've been thinking about consolidating your student loans to lock in a low rate, be aware: Time will soon run out.

Congress this week raised the interest rate on popular Stafford loans to 6.8%, effective July 1, as part of a $40 billion budget-cutting measure. The rate will be fixed, not adjustable.

That's a big change. Stafford borrowers who consolidate now will lock in a rate of 5.375% for the life of their loans. Borrowers who are still in their grace period can lock in an even lower rate - 4.75%. Stafford loans are popular because borrowers don't have to show financial need to get one.

But the higher fixed rate will eliminate that advantage. "Anybody who hasn't consolidated should consolidate before the law goes into effect," says Mark Kantrowitz, a financial aid expert and founder of FinAid. "The appeal of consolidation under current law now is you're taking a variable rate and locking in at a fixed rate."

Rates have been climbing since May. If the formula had remained unchanged, the new Stafford rate probably wouldn't be much lower than the new fixed rate. But under the law, borrowers will no longer benefit if rates later decline.

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