Paying off a student loan? New federal program may help

Posted January 27, 2012 4:40 p.m. EST
Updated January 27, 2012 6:19 p.m. EST

— People trying to pay off student loans might be able to save a little money, thanks to a new loan consolidation program sponsored by the federal government.

The U.S. Department of Education is sending letters to those eligible for the Special Direct Consolidation Loans. Those who do get a letter will need to apply by June 30.

People who want to apply must have at least one student loan held by the U.S. Department of Education and a commercially-held Federal Family Education Loan.

One of the benefits of consolidating a loan under the program is that the interest rate will go down 0.25 percent and will be fixed at that rate for the life of the loan. People can get another quarter-percent rate reduction if they use the Department of Education's automatic debit system.

The repayment terms will not change, which means less interest will have to be paid over the life of the loan.

Ben Kittner, with the College Foundation of North Carolina, says everyone's loan portfolio is different and that consolidating a loan under the program might not be the best move for everyone. (Take a quiz to find out if the consolidation loan is right for you.)

“Your interest rate might be better off with the current loans that you have. You just have to know what you have in order to compare,” he said.

Kittner says there is one big change if people consolidate loans that the College Foundation administers. Those who have any trouble or questions will have to talk with people in Washington, not in Raleigh.