NEW YORK – Rates on federal student loans dropped on July 1, and if you carry such debts, private loan consolidation companies may be trying to get your business. To make the best decision, review the terms under the federal consolidation program so you are aware of all your options.

Student loan rates are tied to the Treasury bill rate. Recently student loan rates dropped from 4.06 percent to 3.42 percent. Some private companies are marketing consolidation plans that lock in attractive lower rates, but with longer payback periods. If you make only a minimum payment, it is possible that you will end up paying more for your loan after consolidation.

According to federal guidelines that govern student loan consolidators, you do have the option to make higher payments without a penalty, thereby shortening your loan term. If you do consolidate, think of your student loan debt like a credit-card balance – to progress financially you need to pay more than the amount required on your monthly statement.

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AP-NY-07-10-03 1744EDT