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In the last Congressional session, there some rather questionable actions by some congresspersons and senators which lead student loan rates all the way up to 6.8%, one of the highest rates it’s ever been. This of course was at a time when mortgage rates were near 5%. Banks plenty of extra federal money, and students were left high and dry. Fortunately the new congress is taking some steps to reverse this process, and in the future we might see a drop in rates. The House has already passed legislation which would drop the student loan interest rate down to 3.4%, and the legislation is pending in the senate. As expected, major banks are furious about the plans to cut interest rates on student loans.

If this initiative passes both the house and the senate and is signed by the president, it could affect college students in a positive manner. Their unsubsidized student loans would collect less interest while they are in school, and would have a lower rate after they graduate. Subsidized loans would not be affected because students do not pay interest on subsidized loans while in college. This would certainly save students a lot of money, but since the money would be so cheap, it could encourage them to go into some un-necessary loans putting them deeper into debt after graduation.

If you have graduated college already and have already consolidated your student loans, this piece of legislation won’t be of use to you. You can only consolidate your loans once, and you’re stuck at whatever interest rate you agreed to. This is why a lot of people were recommending that you consolidate your student loans last summer before the increase in rates.

If you are about to graduate or have graduated and have not consolidated your loans yet, it might be a good idea to wait and see what congress does. It doesn’t make sense to get stuck paying around 6.5% on your money when there’s a pretty good potential that you could get a rate around 3% if this legislation passes. Track the legislation’s movement in the senate and the house and if it makes progress, waiting would probably be a good idea. You’ll only lose a few dollars in interest during the waiting period for not consolidating, and you have the major potential to save a lot of money if the legislation which drops federal student loan rates passes.

When you do choose to consolidate, make sure you get the best deal out there. Compare a number of different potential banks and make sure you are getting the best rate available to you with the best feature set on the loan.