Wednesday, June 28, 2006

Save $100 on School or College Tuition -- or Shopping

The new special offer from Discover Card has been announced, and once again they are giving 5% cash back on tuition. The offer is from July 1 through September 30. (If you don't have tuition to pay, the offer is also good on an assortment of retailers, including Gap, T.J.Maxx, Dell, Office Depot, Pier 1 Imports, and a few others.)

Too bad you only get the 5% rebate on the first $2,000 you spend (the last time they offered this on college tuition, the limit was $3,000), but that's still $100 cash in your pocket. This time around, it can be anything from preschool to college.

Just make sure your student loans (or any other financial aid that's paid directly to the college) is not paid until after you pay $2,000 of the bill yourself. Don't apply till you are ready.

You can pay more than $2,000, but the amount over that will only get you the smaller, "normal" cash rebate, which varies but is 1% at most.

Later, when the financial aid proceeds arrive, the college will reimburse you directly for the excess. Then take that money and pay off the Discover Card bill completely! Do not spend it on anything else, and don't you dare let the balance carry over into another month. You lose a big part (or all) of the benefit if you have to pay interest on the credit card bill.

Saturday, June 17, 2006

Consolidate Student Loans Even If You've Consolidated Already

The rules for federal student loans can be complex. There are a couple of rules you may have run into:

1. You can't consolidate any given loan more than once (this hits you if you've ever consolidated in the past).

2. The minimum amount for loan consolidation is $7,500 (this hits you because the new loan you got last fall is surely less than that).

Well, yes and no. If you consolidated last year, and you're still in school, and you got a new loan last fall, then guess what? You can consolidate again. This gets around both rules, in the following way:

1. You can't consolidate last year's consolidation loan more than once by itself, but if you have other loans, you can combine them to produce a new loan. Yes, this is considered a new loan, so it gets around Rule 1.

2. The combined amount of both loans will certainly be more than $7,500. So this gets around Rule 2.

The interest rate on the new loan is the "blended" rate of both loans. Essentially, you keep paying the same "very low" interest rate on last year's consolidation, and the "still pretty low" interest rate on the latest loan.

So get going. You have only till June 30, or else your interest rate will jump right away, and will be adjusted every year from now on. That's a risk. If you consolidate, you lock in the low rates forever.

Where else can you borrow long-term money for 4.7% (student loan) or 6.1% (parent loan)? Even though those numbers are about 2% higher than last year, they're still very good.

The downside is that you have to start repayment right away, but these low interest rates are worth it. You can set up a graduated repayment schedule, where the payments are lower for the first few years and then increase. (But be sure to put aside money to pay them off!)

See my previous post for a few places to consolidate.

And don't forget the incentives. For instance, just about everyone offers a .25% discount on the interest rate if you set up repayment

MOHELA had a great incentive last year -- a rebate of up to $1,000 after only 15 on-time payments. They don't offer it this year, but this is a place you should check back on. They always have good incentives for the regular student loans, and they might bring back some better incentives for the consolidation loans next year.

But they do have a new 100% online application process. No mailing papers back and forth as you had to do last year. Others might have a similar system. In order to sign your promissory note, they look up your credit report in real time, and ask questions based on the information they find. If you answer correctly, they know it's you. Seems like a neat idea for identify verification.

Saturday, June 10, 2006

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.