Kids & Money

Take advantage now of student loan consolidation

When someone pitches me a special limited time offer for things like magazine subscriptions, miracle diet pills or muscle-layering workout gear, I tend to press my consumer anxiety button.

That’s because these “bargains” can be expensive and impulsive and have more than the usual strings attached.

But a special one-time loan consolidation offer from the U.S. Department of Education is an exception to my rule.

The Special Direct Consolidation Loan program was rolled out in January as part of a series of steps by the Obama administration to make college education more affordable.

The good news is that the program offers some advantages over traditional federal loan consolidation plans, the biggest being a 0.25 percentage-point decrease in the borrowing rate.

Another selling point is that the length of time you have to repay the loan will remain the same as your existing repayment terms. It will not start over like it does under traditional consolidation plans — meaning you will pay less interest over the life of the loan.

Consolidating your federal loans also should result in less confusion because you’ll have one bill, one payment, one servicing company.

The special program is open only to borrowers who have at least one direct loan from the Department of Education and one or more Federal Family Education Loans from a commercial lender. Borrowers must be current or less than 270 days delinquent on their payments.

But eligible students need to act quickly because the program expires the end of June and the chances of extending it are virtually nil.

About 6 million borrowers with federal student loans — or about one in six currently in repayment plans — are eligible for the program.

By now, most eligible borrowers should have been contacted by federal loan officials, but you can check your status at

Through May 28, the Department of Education said it had received 277,000 enrollment applications from borrowers.

Mark Kantrowitz, a financial aid expert and founder of the website, said the special consolidation program is a worthwhile option, although he estimates it will yield only “modest savings” to eligible borrowers.

Kantrowitz said borrowers who are already receiving rate discounts from their current lender should weigh the tradeoffs of switching to the new program. Existing discounts do not transfer, he said.

If the special consolidation plan is not for you, don’t forget there are at least a half dozen other federal student loan repayment options to choose from. The government’s website at can help you pick the right plan for your situation.