Consolidate student loans right now, before July 1

For college students and parents everywhere, student loans are often a part of the picture. There is a legitimate concern about the desirability of these loans (Americans have too much debt in general nowadays), but I'll not get into that now. If you already have a loan, I'm talking to you.

Every year the federal student loan interest rate is re-set on July 1. Last year (the first half of 2005) was really the year to consolidate because the interest rate was the lowest in the history of the program. Rates went up in July 2005, and they're going to jump again on July 1, 2006.

There are numerous lenders where you can consolidate, such as Sallie Mae, College Loan Corporation, MOHELA, and nelnet. Different lenders have various incentives and rebates. College Loan Corporation seems to be one of the better ones, offering a 1% to 2% rebate (depending on the loan balance), after nine on-time payments. And practically everybody gives you a .25% reduction in interest rate for setting up a direct-debit automatic payment plan. So do it.

It's easier and quicker to consolidate where you already have your loans, so weigh that against the possible rebates and the time remaining. If you consolidate somewhere besides your current lender, there will be delays while the loan is transferred from one lender to another.

Just do it -- get your application in as soon as possible, but definitely by June 30. Missing this deadline can cost you hundreds or thousands of dollars.

Next time: Why the rule against consolidating more than once isn't quite as bad as it seems.