The interest rate increase on federal student loans (http://www.nextstudent.com/privateloans/privateloans.asp) will increase 1.84 percentage points on July 1 and is based on the announcement of the May 30, 2006 auction of 91-Day Treasury Bills.

In less than five weeks students will be subjected to the second largest rate increase in the history of the federal student loan program. With the upcoming rate hike, student borrowers are in the perfect position to consolidate their loans and lock in a low rate before the deadline, according to NextStudent, a premier education funding company based in Phoenix.

The interest rate increase and other changes to rules in the federal student loan program are due to the passing this past February of the Deficit Reduction Act of 2005, S. 1932, which was signed into law by PresidentBush. Along with major cuts to various federal programs, the legislation cut .7 billion to the federal student loan program.

Stafford and PLUS Loans Affected

Student borrowers who are not convinced that consolidation is a smart choice should note the upcoming changes on Stafford and PLUS loans. New rates for Stafford loans disbursed on or after July 1, 2006 will be set at 6.8 percent. For PLUS loans disbursed on or after July 1, 2006 the fixed rate will be 8.5 percent. However, if student borrowers take advantage of consolidation before July 1, they can lock in a low interest rate that stays fixed for the loan’s term. Borrowers also can extend their payment term.

July 1 is less than five weeks away so there is not that much time for students to make their financial situations easier. Consolidation bundles together all of a student’s loans to make one simple monthly payment. Instead of numerous student loan bills, students moreeasily can manage one monthly payment with one low interest rate.

NextStudent’s Consolidation Rates

Consolidation offerings through NextStudent include a 4.75 percent rate for qualified in-school borrowers. Also available is a 2.75 percent interest rate for qualified borrowers when benefits are applied. Benefits include:

• .60 percent reduction for students who consolidate after graduation

• .25 percent reduction for using Auto Debit

• 1 percent reduction after 36 consecutive on-time payments

Consolidation is a free government program. Through NextStudent there are no fees, charges or prepayment penalties when borrowers consolidate, and all borrower information is fully secure and confidential. Borrowers receive low rates and one-on-one service with a personally assigned education finance adviser.

Heavy Burden for Students

The rising cost of acollege education coupled with the interest rate increase will make it more problematic for those students who want to receive a degree. Those hardest hit will be from low-income and middle-income families who oftentimes are denied or deny themselves a college education due to the high cost.

Consolidation can help students who have college loans (http://www.nextstudent.com/privateloans/privateloans.asp) with high interest rates and numerous monthly student loan bills. One monthly payment with a lower interest rate and extended payment term can be the first step to helping students ease their financial burdens. However, it is important to take the first step by consolidating before the July 1 deadline, which is just weeks away.

NextStudent believes that getting an education is the best investment you can make, and it is dedicated to helping you pursue your education dreams by making college funding as easy as possible. Learn more about Student LoanConsolidation (http://www.nextstudent.com) at http://www.nextstudent.com/.

If you go by the name, consolidation suggests that all your loans will be paid by onecompany only. Student loan consolidation allows the students to combine all their loans from various lenders into one and pay only one interest amount and that too at a reduced new rate. After consolidation, students will have to pay only one monthly installment to that company and thereby gets relieved from the headache of multiple installments and higher interest rates. 

Make a decision whether to consolidate or not

If you need to consolidate student loan then carefully observe the pros and cons of the consolidation. Before going for student loan consolidation, think about the factors given below:

1.    In the consolidation process, all your loans are treated as single and have fixed interest rates. Whether the rate increases or decrease, it is not going to affect you. So, if the rates are going to plummet, it is better for you to wait and watch.

2.    Make sure that you can consolidate student loans as you canavail consolidation for most federal loans which includes FFELP loans, Perkins, NSL, Guaranteed student loans, FISL, Health Professional Student loans, HEAL, and direct loans.

3.    Remember that consolidation extends the loan term due to which overall you have to pay more even if the rate is low.

4.    Consolidating all the loans is not a good idea because the rate of interest is fixed after finding out the average of all the interest rates and you may like higher rate loan to be out of the consolidation.

Follow following steps before going student loan consolidation

1.    Gather information regarding your loans’ status.

2.    It is mandatory for you to avail consolidation facility from the already associated lenders.

3.    Credit checking is not required so be cautious if any lender asks for such formalities.

Profits from student loan consolidation />
1.    Multiple loans are converted into single loan.

2.    It reduces monthly installments by a considerable amount which can range up to 50%.

4.    Improves your credit ranking and is easy to pay monthly installments.

5.    No checking of credit, no origination or application charges.

Hence, student loan consolidation is a great option for a life free of debts. But the actual task is yours i.e. to find a loan consolidator according to your requirements and hit the consolidation interest loan rate student .