Consoldating student loans

Instead, it's a complex process with which millions of college grads must grapple.

Two out of every three undergraduates walk off the graduation stage with some form of student debt, according to a 2008 College Board study.

Another is that beginning in July 2006, all federal student loans began carrying fixed interest rates.

Before then, federal loans were issued with variable rates; by consolidating them, borrowers could often lock in a rate that was lower than what they were paying on each loan separately.

The rate is defined as the difference between the person's adjusted gross income (the amount on which you are subject to pay federal taxes) and 150% of the federal poverty level (which comes out to ,245 for an unmarried person with no children, based on current rates.) For an unmarried individual with no children and an adjusted gross income of ,000, monthly payments would be capped at 5.

An increase in salary would mean an increase in the monthly payment.

Like her, many consider consolidating their loans as a way to lower their monthly payments and simplify their finances.

The theory is that, either by stretching out repayment of the loans or refinancing them at lower interest rates, the borrower can reduce monthly payments.

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Read the terms carefully, and if possible, have a friend or relative do the same.He predicts the interest rate will tumble to a historic low of 2.6% from its current 4.2%. Borrowers who have already consolidated won't be permitted to do so again at the new rate.Starting this July, borrowers who have federal student loans can opt for a new income-based repayment plan.If, for example, you stretch out a standard 10-year student loan to 20 years, you can cut monthly payments by 34%, but you will end up paying double the amount of interest over that time, Kantrowitz says.If some or all of your loans were written before July 2006--say, in your freshman year of college if you are graduating this year--wait until after July 1, 2009 to consolidate, Kantrowitz suggests.

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