STUDENT LOAN UPDATE

It doesn't seem like a week goes by where there is not bad news relating to the student loan world (which has been walking lock-step with the housing and credit 'issues' that dominate the press) ...

Most of the bad news began last year when Congress decided to do students a "favor" ... long story short, that essentially drove many lenders out of the business. As of last October 1st (2007), private student loan companies that had offered substantial, competitive borrower benefits on their federal student loan consolidation product discontinued their benefits (this took on several faces - some discontinued their federal loan consolidation product, some discontinued the borrower benefits they had offered prior, some removed all 'meaningful' borrower benefits); ultimately, the law change made it no longer profitable for them to offer these products. The good news was that State programs (that had offered good benefits all along) continued to do so - programs like North Carolina and New Hampshire [most notably] offered programs open to individuals outside of their state and offered rate benefits ranging to as much as a 2.25% reduction in interest ... You may [or may not] be aware, but during the past couple of weeks, North Carolina reduced their benefit from 2.25% to .3%, New Hampshire reduced their benefit to the current benefit norm (.25%), and others like South Carolina that had been above average have discontinued their federal program altogether. It's hard to believe that the program that for years has been one of the worst financial programs available (The Department of Education) is now in the same boat (.25% benefit) that the majority of other benefit-offering programs provide.

So, if you're graduating, seeking to consolidate your federal loans, here are a couple things to keep in mind ...

- You will still want to review your state consolidation program (there are programs like Utah [although Utah has residency restrictions] which still offer meaningful borrower benefits). This number is shrinking.

- Shop around ... the law does allow you to choose the company you consolidate with (even if all of your loans are only with one lender); do what makes the most sense financially for your situation.

- Lastly, if you have unconsolidated loans that date pre-June 2006 (back before Stafford loans came with a fixed 6.8% rate), you will want to hold off on consolidating your loans until the rate change that will take effect on July 1st. They will definitely be dropping significantly from their current 6 5/8% level ...