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Please! Your rate is probably either 5.99% or 6.79%. It was set based on an auction of 3-month T-bills on May 29, 2001. The auction came in with a rate of 3.69%, and so you add either 2.3% or 3.1%.

The current T-bill auctions are running around 1.85%. If that rate held (and it won't) until next May, your interest starting July 1 would be 4.15% or 4.95%. Even if the T-bill doesn't stay this low (and the reason is the recession and terrorist-driven "flight to quality"), chances are that the T-bill rate will be lower than 3.69% next May.

Go look at post #325, (I think.)

Don't touch your variable rate loans until next year--June or July, depending. Take up a hobby and don't think about consolidations.
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http://boards.fool.com/Message.asp?mid=15240981

Yup, post #325. That is probably one of the most useful ones on the entire board, and it's got ZERO recommends! And the foresight the guy had, to say that the rate could be lower than 3.69%, way way way back before the Recession was declared, and 9-11 happened . . .
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Hello W505a,

Pretty sure you might have been talking about me with this post. But I too think that all my loan rates are going to drop and I'm not planning on thinking seriously about consolidating until next May when I can see what the market is doing and getting tons of great advice from you and others.

At any rate, who cares who you were talking about. The advice you give is sound and helpful, thank you for being such an important part of this board.

-Megan
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Hi Megan, I meant it as general comments, but I probably was inspired by your post--if it was the latest in the series. But I know other people have been letting that question pop up recently, so I am sorry if my blunt approach caused you to feel any embarrassment.

One thing I learned this year about boards is to bat down any maybe-not-so-good-ideas very fast. I was going back and forth with some people in the summertime about Direct Loan's consolidation discount, and I wish I had been more forceful, 'cause I think some folks in the club here would have benefitted from Direct Loans.
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I'm not embarrassed, in fact I totally agree with you about batting down the bad ideas. Sometimes the club needs just that, a big club over the head to get things straight!
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hello everyone:

been observing the goings-on in the group for a couple weeks now...thanks for all the sage advice. having graduated from medical school in may with a total of about $85756 in stafford loan debt, i'm now about halfway done (hallelujah) with my internship year and very close to entering repayment; of that figure, $21007 of the total is at 6.70% and $64749 is at 5.99%. unfortunately i missed the boat on consolidating this summer but am interested in doing so now. i think i understand how yearly rates are calculated based on the sale of the t-bill (thanks w505a), but i'm confused about one thing:

when i go to the direct loans consolidation calculator and enter in all the pertinent fields, the rate it quotes me is 6.11%. why should this number differ from the 5.99/6.79 rates, given that interest rates on stafford loans remain constant for a one-year period? does the interest rate for consolidation change based upon when one consolidates? because if so, then the strategy of waiting until june '02 seems risky. i'm a bit confused...

thanks for the help.

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when i go to the direct loans consolidation calculator and enter in all the pertinent fields, the rate it quotes me is 6.11%. why should this number differ from the
5.99/6.79 rates, given that interest rates on stafford loans remain constant for a one-year period? does the interest rate for consolidation change based upon when
one consolidates? because if so, then the strategy of waiting until june '02 seems risky. i'm a bit confused...


beevick,

The rate of the conolidated loan will be the weighted average of your two loan rates. That is what the 6.11% number is. Since loan rates are adjusted in June, you are better off waiting until then before doing anything. If the economy picks up, and the T-bill rates go higher, consolidate in May to lock in the lower percentage. If the economy is still slumping, you will be able to get a better rate after the adjustment.

In the mean time, if you begin paying off the loans and have some extra cash you want to put towards paying down the loan, pay down the 6.79% loan as much as you can. This way, when you consolidate, the weighted average rate will slide in the direction of 5.99%.

Hope that helps,

- Rich
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If this Monday's T-bill auction (1.70% investment rate) could be duplicated in July, you would have loans in July at 4.00% and 4.80%. You would take the weighted average of those two amounts (rate * amount owed for each loan, divided by total amount owed.)

If May's rates turn out higher, you can always hurry up and consolidate on or before June 30, 2002.
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