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It's a good thing, because for the first time in five years, the interest rates on student loans will be going up. Effective July 1, the new variable rate on federally backed student loans will increase by 1.93 percentage points to 4.70 percent for in-school borrowers and those in their six-month grace period. The rate will also rise by 1.93 percentage points to 5.30 percent for borrowers currently in repayment. The rate on Parent PLUS loans will rise to 6.10 percent.


Students still in school who want to lock in the lower rates have to act before June 30. (And don't wait until June 30. Procrastinating could cost thousands of dollars over the life of the loan.) There is a downside to consolidating while you're still in school (you knew there had to be a catch). Typically, borrowers get a six-month grace period after graduation before they have to begin repaying. Consolidation eliminates the grace period.

However, even though students give up the grace period, they still won't have to start making payments until they leave school if they request an in-school deferment.

Marlene of San Diego asked, "What if you have all your loans with the same lender? Can you shop around for the best consolidation terms?"

Now the logical, free-market answer should be yes, right? But of course it's not that simple.

If all your loans are held by a single lender, you are required to consolidate with that lender. If your lender doesn't consolidate, or your loans are held by multiple lenders, only then can you shop around.

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