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Question: Our interest on our parent plus loan has fallen every year since our son >started college 5 years ago, not just on the new loans each year, but on the >old ones too. So, how anyone could be stuck at 8.75, I don’t understand, >unless they took out some kind of regular loan instead of getting a real >student loan, like ours with Sallie Mae. My son will be able to put them >all together for something very low, around 4%. They will charge us more, >as parents. His doesn’t start repay until Dec, and we will be having to >decide whether to consolidate or not. I don’t know, but seems like it’s >been implied that he will get a better deal if he consolidates before the >payments start.
Answer: The interest rate on a consolidated loan depends on when you consolidate. If you consolidate before the end of the grace period there is a lower rate than if you wait until you have entered the repayment period. Currently, consolidation while in grace period is 3.5%, but it’s 4.13% if you wait until the grace period is over. This can be a significant difference over many years.
But, if you consolidate during the grace period the grace period ends. So the trick is to arrange consolidation to take place just before the end of the grace period. Most lenders will allow you to set this up now to take effect at the right time.
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