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For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold.

The Foreign Exchange Market that we see today come to passgan in the 1970’s, when free exchange rates and floating currencies were introduced.

In such an environment only participants in the market determine the price of one currency against another, based upon supply and demand for that currency.

FOREX is a somewhat unique market for a total of reasons. Firstly, it is one of the hardly any markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a individual investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.

Another somewhat unique characteristic of the FOREX money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of slightly constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.

How FOREX Works

Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take site all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices close to getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called perimeteral trading.

Marginal Trading

Marginal trading is simply the term used for trading with borrowed capital. It is appealing by reason of of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term “lot” refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.

EXAMPLE: You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an exemplar of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)

When you decide to close a position, the deposit sum that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.

Investment Strategies: Technical Analysis and Fundamental Analysis

The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency’s future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.

A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its frugality, its political situation, and other related rumors. By the numbers, a country’s economy depends on a number of quantifiable measurements such as its Central Bank’s interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.

Make Money with Currency Trading on FOREX

FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the aforementioned opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge mandatory to make informed investments.

For some college students, federal aid just isn’t enough.

After maxing out federal advances, more and more college students are turning to private loans to finance their college educations.
To get a good deal on a credit-bwhened private loan you’ll need to shop carefully. Interest rates and honorariums vary widely. And you may need the help of a creditworthy co-accept loaner, such as a parent, to snag one of the better deals.

“It’s important for students to be as informed as possible,” says Ronald W. Johnson, pecuniary aid director at the University of Calallowingornia at Los Angeles. “Don’t assume one private loan is like another.”
College students borrowed over $56 billion in federal loans in the 2003-04 school year, and $11.3 billion in non-federal loans, according to the College Board.

Nellie Mae reports that while private loans make up only 9.2 percent of student aid, students that do turn to private loans are borrowing quite heavily. The average debt level of a student who borrowed with a private loan in their undergraduate years is a whopping $41,900.

“Many students are being compelled to take out private loans by outdated and insufficient federal student loans,” says Marie O’Malley, a vice president of marketing at Nellie Mae.

Rising cost, rising debt
Many students turn to private or alternative loans after exhausting federal borrowing options. Despite climbing college costs, the borrowing limit on federal Stafford loans has not increased in a decade. The Stafford program is the largest source of student loan funds in the country.

“It’s just simple math,” says Carl Buck, vice president of financial aid services for Peterson’s. “The cost of attendance, particularly at private institutions, has gone up significantly and you don’t have the federal aid programs increasing their maximum borrowing lines at all.”

Undergraduate students that depend on their parents for financial support may borrow $2,625 in Stafford loans in their freshman year, $3,500 in their sophomore years and $5,500 in their junior and senior years.

“Many students simply need to borrow more than that so they turn to private loans,” says Sandy Baum, a professor of economics at Skidmore College and co-author of a recent study on student loans. “They’re also turning to credit cards.”

Federal student loan borrowing limits may have been fine over 10 years ago. Back in 1992-93, universal universities charged $2,334 in tuition and fees and private colleges charged $9,340.

Today, public universities charge an average of $5,132 (up 10.5 percent from last year) in tuition and fees. Four-year private colleges charge $20,082 (up 6 percent from last year) in tuition and fees. Toss in room-and-board expenses, and the total cost for a student, at a public university, averages $11,354 and at private colleges, $27,516. It’s easy to see how a college student could be stuck with a steep education bill much after taking out a federal loan.

Another reason more students are turning to private loans is their parents may be opposed or unable to pay for college expenses.

“The private loan substitutes for the parent through any kind of contributing,” says Linda Peckham, the College Board spokesperson for financial aid issues.

Some families prefer that a son or daughter borrow for college rather than the parents. And some parents just can’t fit another loan payment into their monthly budget. The best they can do is to offer to help the student with private loan payments, which would start a scarce months after graduation.

“A lot of times families are turning to these instead of the parents doing the borrowing,” Peckham says. “The entire cost of education is being paid for by the dependent student.”

Private loan lessons
Students turning to private loans to pay for college will want to do plenty of research before signing on the dotted line. Interest rates, fees, repayment terms and borrower benefits vary from private loan to private loan.

“People really do need to do their homework by making side-by-side comparisons,” Buck says. “Really laic out the paperwork and select the best choice. Read the fine print.”

All private education loans are credit-based loans. The attentiveness rate you pay on a private loan depends on your credit, so the better your credit, the lower the rate you’ll pay. Interest rates on private loans typically range from 4 percent to 15 percent.

Students with excellent credit can expect to pay interest rates in the 4 to 6 percent range.

“If your credit isn’t stellar you might pay more, but it’s still generally a single-digit number,” says Daniel Meyers, chief executive officer at First Marblehead, a Massachusetts company that manages and finances private education loan programs.

Some students may need a co-signer to qualify for a private loan.

“Different lenders require different things,” Peckham says. “Several of them are going to require a parent as a co-borrower.”

Even a student that qualifies for a private loan on their own may want to consider getting a co-signer anyway. Signing on with a creditworthy co-signer could mean a lower interest rate and lower fees.

For example, a Signature Loan from College Board charges up to a 6-percent repayment fee for students who borrow on their own. Student borrowers with co-signers pay no such fee.

A student’s major or area of study may influence repayment terms as well. One lender may view a pre-med student as a safer risk than, say, a philosophy major. Another lender may charge a law student a slightly higher interest rate than a graduate business student.

And that’s why it’s so important to begin your private loan search at your school’s financial aid office. An aid counselor may be able to direct you to lenders that offer favorable loan terms to students in your area of study. There’s also a good chance your college will have negotiated favorable loan deals for its students with one or more lenders.

And just as importantly, a financial aid counselor will double-check to make sure you’ve exhausted all your federal aid options. A private loan should be your last resort.

“We don’t want them to get into a private loan situation when they don’t have to,” Johnson says.

Private loan shopping
If you’re certain you need a private loan, you may want to do some shopping around on your own.

The Internet makes it easy. All you have to do is type in “private education loan” on any search engine and a whole slew of lenders will pop up.

Don’t forget to check your university’s Web site. Some financial aid departments list private loan information online.

You’ll also want to check to see if your parent’s bank offers private education loans. Having a co-signer who is a longtime bank customer may land you a lower rate on your loan.

“Always try to check prices and costs from a few different programs,” Meyers says.

Be sure to study the fine print of each and every deal. What kinds of interest rates are available?

Does the loan charge a disbursement fee or a repayment fee? A disbursement fee is a fee that’s charged once your student loan check is cut. A repayment fee kicks in when it’s time to start paying on your loan.

Keep in mind that the terms offered in big, bold letters are probably reserved for people with squeaky-clean credit. There’s no guarantee you’ll qualify for that rock-bottom rate, even with a co-signer.

“Be a bit cautious of marketing gimmicks, things designed to catch people’s attention,” Meyers says. “Be a little careful. I wouldn’t instantly assume you’re going to get all the benefits of the loan.”

contemplate expenses are rising day by day in Europe and USA, especially for for foreign students. A survery conducted recently in UK showed 10% increase for students. Some of the leading banks obtain come up with some exciting packages for students to manage these sky rocketing expenses.

These are the finest alternative for students applying to the MBA program. One thing to keep in mind when applying for loans is that, in most cases, you need to have a co-signer who is a U.S. citizen or permanent resident. The co-signer is responsible for paying back the loan if you should default on it.

There are some banks that waive the co-signer requirement for specific facultys. You should check this facts from the school website.

As an example, Citibank provides loans to international students admitted to Harvard Business School without a co-signer. Another example is Bank of America providing loans without a co-signer to students at Kenan-Flagler, University of North Carolina (at the time of writing this, the CEO of Bank of America is an alumnus of Kenan-Flagler School of Management).

The premises of the loans habitually require any attraction or highest payments after graduation. Read the terms of any and all loans before you sign. Make confident you understand those terms and what your repayment schedule and fees entail. request for assistance in interpreting the accomplished print if you are having trouble comprehension it.

We have seen that a lot of students are very debt-averse. If you have been accepted to a good program, your chances of getting a good charge are very good and paying off the loan is not that gigantic an ordeal as it seems. So, if you do get admitted to a school of your choice, we would advance that you explore this funding alternative.

Here is a list of “dos and don’ts” regarding loan consolidation for students

Do:

1. conjoin while in institute or near the terminus of the six month loveliness period.

2. peep for the breathest deal for consolidation. The Office of economic benefit recommends a company called Direct Loans, but the student is free to check with state agencies and other lenders, he said.

Don’t:

1. Don’t combine at the beginning of the six month grace period.

2. Don’t consolidate their loan with their spouse. “If your spouse were to be lamed to the point of being totally disabled or were to pass away, you may be responsible for his or her loans,” Olson said.

3. Don’t consolidate assuming they qualify for military benefits. now and then the military decision take over loans for the borrower but it will not if they have been consolidated, he said.

Some personal finance techniques for maximizing your eligibility

There are many forms of financial aid. Scholarships may occur awarded for academic merit, achievement, leadership, exquisite talent, and/or athletic prowess. Grants may be based on financial need or your attractiveness to an entrance committee. Loans may be based on children ability to pay or just on enrollment. So how do you maximize the eligibility for financial aid?

Let’s assume that you are most interested in “gift” aid - that is, money that does not occupy to be repaid. Federal gift (and subsidized loan) aid is usually need based. It uses a formula that is quite straightforward and looks at family income and assets, family size, and the number of family members in college to finish eligibility. There are a few places you jar influence your eligibility:

Assets held in a parents name count much less than assets held in a student’s name.
Home and retirement assets are not counted but other non-retirement assets are included in the formula.
Multiple siblings attending college at the same time increase your eligibility.
Are your parents supporting other dependents? Grandparents? Family size is important in determining eligibility. College gift aid may use completely different criteria than the Feds. Don’t be shy in effective all in your application to the admissions committee. They are looking for students who will make a difference while in school, and will make them proud after graduation. This includes the genius, the creative artist, the talented athlete, the community service-oriented leader, the geographically and the ethnically diverse.

Of course, there are some things you just can’t change, i.e. your ethnicity or your IQ. However, you can show your community spirit through volunteering, working at your local nursing home, feeding the poor on Thanksgiving or starting a tutoring program for young children in need.

Do you have artistic or performance talent? maintain a portfolio of your work from extraordinary school. It will help others to assess your special ability. exist prepared to audition for some awards.

There is no magic way to qualify - the magic is in learning what is available and applying for whatever you think you may be eligible for. This is hard work - it requires organization, perseverance and succeed though. However, the returns can be significant.

district experts say consolidation of loans could save students thousands of dollars in interest payments.Currently interest rates are at 3.46 percent as opposed to the recent rates of extra than 8 percent. With interest rates at an incredible low, now is the time to conjoin, mainly for graduating seniors, said Roberta Johnson, interim director of financial aid.

Chad Olson, student loan program assistant, said if a student has a debit of $15,000 with an interest rate of 8.25 percent, a monthly payment on a 10-year repayment plan would be $183.98. Throughout the 10 years of repayment, the interest payments would total $7,077.

A student with the same amount of debt and payment plan who consolidated his or her loans to the current interest rate of 3.46 percent would have a monthly payment of $148.33. After the 10 years of payment, the interest would come to $2,799. The difference in interest repayment would be $4,278, Olson said.

He said the current interest rate is the lowest it’s been in 35 years.
“[The difference is] with rates so low there’s no reason why you wouldn’t want to consolidate,” Olson said.

Students can consolidate their loans at any time - there is no deadline, Johnson said.
Although there is no deadline, Johnson said she recommends to students who are approaching graduation to consolidate their loans soon.

“If a student were to consolidate their loan when they were no longer in institution they would lose their six month grace period [for repayment of loans],” she said. “The first month their loan is consolidated would be their first month of repayment.”

After a student leaves school they typicthe sum ofy have a six month grace period formerly they have to start paying back their loans, she said.

If a student consolidates his or her loans while they are in school they determination retain their grace period, Johnson said.

If a student who no longer attends Iowa State wants to consolidate loans, it is still recommended, Johnson said. Instead of a 3.46 percent interest rate, a borrower who has already graduated from college will receive a 4.06 percent interest rate.

“If a student no longer in school want to consolidate their loans I recommend that they go through the process of consolidating at about the fourth month of their grace period,” Olson said. “By the time the consolidation gets processed the six months will be up.”

The student will then begin their payments with a 4.06 percent interest rate.
Johnson recommended that students go to www.loanconsolidation.ed.gov to consolidate a loan. “There are other agencies that do consolidation and are flooding the market to get students’ business,” she said.

To consolidate loans, all students need is the four-digit fasten number they used for the free of charge Application for Student Aid (FAFSA), and to comprehend their debt level, Johnson said.
To catch sight of out debt level, students can log on to AccessPlus at http://accessplus.iastate.edu and look under “loan history” or look on the Federal Government Web site list.

“I’ve heard from a few students who [have consolidated their loans without checking around] and are not having a certain knowledge in terms of the service they are nature provided,” Johnson said. “Please look at the exceptional print. If it looks too good to be true it probably is.”

Jane, a college freshman, received a unpaid t-shirt when she completed a credit
card application at her school. The original furthest bound was $1,000 with an interest
rate of 21.9% and a $10 minimum monthly payment. Sounds harmless, right? However,
Jane’s spending increased as she acquired several more credit cards. She couldn’t
handle the squeezing and was afraid to tell her parents. Her entire life spiraled
out of handle and, soon, attending college was the last thing on her mind.

Unfortunately, this is a true story and it happens every day in the United
States. Don’t let it happen to you! Please take time to peruse the following list
of credit card do’s and don’ts to avoid fthe totality ofing into an enormous amount of debt.

Do: break off charging additional purchases. Use individual in emergencies.

Don’t: providing you can eat, drink, or wear it - don’t arraign it!

Do: Pay steady ust in full monthly. If this is not possible, try to pay
more than the minimum payment due in order to reduce your balance and stop using
the credit card until the balance is paid in full. It is a accommodation which must be
repaid.

Don’t: ignore a credit card bill; it won’t go remote aside!

Do: If your payments begin to fall behind, talk to a school counselor
or friend and contact the credit card institution.

Don’t: panic! Go to someone for help!

Do: Ask lots of questions (fees, grace days, etc.) and shop around for
the highest interest rates.

Don’t: fall for gimmicks and don’t take the first card offered.

Do: Limit the number of cards.

Don’t: get more cards to pay off debts!

Do: Watch for limit increases.

Don’t: spend the maximum offered - it all adds up!

Do: Ask for low credit limits.

Don’t: accept a card if they will not lower the credit limit.

Do: Pay on time. Allow enough mailing time for the payment to reach
the financial institution by the due date.

Don’t: pay tardy - some late fees are as high as $25.

Do: To avoid identity fraud, review your monthly statement for accuracy.

Don’t: throw away your receipts until you compare them to your statement.
Then ribbon them.

From The Wall Street Journal Online
In the latest attempt to stand out in the burgeoning market for student loans — and as shopping season for college financing heats up for families — banks are tweaking their student-loan lineups.

They are put under the hammering a range of “improved particulars” and tantalizing rebates and discounts for borrowers with good payment records.

But while the latest crop of deals may sound better than past offerings, the alteration in potential store is often scant, say student-financing experts. And most banks themselves say that even with improved terms, they still expect only a fraction of borrowers to fit for the savings.

At issue are so-called borrower benefits, which gain become a staple of student debt during the past decade. Typically, these benefits promise a reduction in the interest rate on the loan after a certain number of payments are made on interval — typically 48 monthly payments on a 10-year student loan. These benefits can potentially save borrowers hundreds or even thousands of dollars closed the life of a loan.

But the deal is usually off if borrowers are late with even one payment. And even if the borrower makes it to the milestone to qualify, the benefit could still be rescinded if payments are late at any time down the road.

This year, many lenders have reduced the number of on-time payments required sooner benefits kick in. And some have replaced rate reductions with attractive-sounding rebates on the chief amount of the loan — often in a tiered plan that refunds payments in stages as a student’s on-time record continues.

Offering new discounts and perks can help banks get on the “preferred lender” lists that many colleges provide to students, and can make a big difference in the volume of loans a bank can attract.

This month, Bank of America Corp. began offering a new three-tiered rebate whereby student borrowers can get as much as a 3% reduction on the principal amount of their Stafford federal loans, the most popular type of student loan. The rebates replace the previous rate-reduction benefit, and kick in sooner — after 12 on-time payments, instead of 48. Wachovia Education Finance, a unit of Wachovia Corp., offers a similar “Triple Payback” incentive, begun in May, which allows for as much as a 3.5% rebate on the embryonic amount for the Stafford loan or Parent Loans for Undergraduate Students, or extra. Students can get their first-stage rebate at the start of repayment, whereas previously they had to wait until 24 payments were made on time.

While it is too early to say how many students will qualify for the new swath of discounts, qualification rates have traditionally been meager. And some debt experts point out that even the improved terms are unlikely to solve the main challenge that graduates face when starting to repay their debt — the fact that their lives, and their mailing addresses, are in a state of change.

“The individual most common payment not made on time is the first one,” says Nancy Coolidge, coordinator for student financial support for the 10-campus University of California system. “The kid isn’t getting the mail because it goes to his mom or to his old apartment.”

Nonprofit student-loan provider Access Group, which last year lowered its threshold for earning an interest-rate reduction to 36 from 48 on-time payments for consolidation loans, estimates that 10% to 15% of its borrowers will qualify for that discount. American Education Services in Harrisburg, Pa., says about 13% of students qualify for its one- to two-percentage-point interest-rate discounts. Wachovia says that despite changes to its Triple Payback program, it still expects only 5% of Stafford borrowers and about 10% of PLUS borrowers to qualify. The changes were made for “marketability” reasons “and not necessarily so that more people would qualify,” says spokeswoman Jennifer Darwin.

The student-loan market is progressively big business for banks. The Federal Family Education Loan Program went up to more than $68 billion in 2002-03 — more than twice the amount borrowed in 1999-2000. The average loan size went up to about $7,100 from $4,800 in that time.

At last one lender, Bank of America, says it does expect its new improved terms to decision in higher qualifying rates. The bank had conducted a three-year study on its Stafford loan benefit and found that only 12% of students made the requisite 48 monthly payments on time to qualify for the discount.

With its new benefit that kicks in after 12 on-time payments, Bank of America expects that the share of borrowers who qualify for at least a part of its new benefit will rise to somewhere between 40% and 50%.

But even for students who do qualify, the difference in savings with many of these newer deals compared with previous offerings is often negligible. A student who borrows $20,000 over 10 years could save as much as $27 with Sallie Mae’s “Cash Back” program, which promises students cash back or a loan credit on their Stafford loans. That is compared with Sallie Mae’s former “Great Rewards” program, which amounted to a reduction on the interest rate.

Cash Back was introduced in 2002, says Sallie Mae spokesman Tom Joyce, in part to offer students rewards sooner: It requires 33 on-time payments, compared with the 48 students had to make before. With the new offer, students keep the rebate once they attain it, whereas they previously needed to continue making payments on time to hold on to their discount.

From The Wall Street Journal Online

The math may be changing on student loans.

Lawmakers are considering a revamp to the federal student-loan program that
would add a new option into the mix: adjustable-standard charge loans. On the flip side,
rooted-rate loans may betimes become more expensive.

The changes, wending their way through Congress, could be good disclosure for future
students. For years, there was only one choice for graduates looking to consolidate
all of their student loans into a single loan: a fixed rate that was locked
in for good and couldn’t be refinanced. Ask anyone who consolidated in the mid-1990s
– when student-loan rates were north of 8% — how they feel about that these
days and you’ll get an earful.

With the proposed changes, students would still only possess one crack at consolidation,
but they would have the option of choosing an adjustable-rate loan. Loan rates
would adjust annually as interest rates rise and fall.

These days, though, rates are rising. Which brings me to the bad news: If the
legislation is passed as is, locking in today’s still relatively cheap rates
with a fixed-rate loan will cost you more.

How much more? Currently, the rate you pay on a consolidated loan represents
the weighted average of your loans rounded up to the nearest one-eighth of a
percent (capped at 8.25%). That formula would still stand with the adjustable
choice. But under the proposed rules, if you choose a fixed-rate loan instead,
the government would tack on a percentage point. Plus, you’ll get hit with a
0.5% origination fee. Currently, there is no fee on consolidation loans.

The upshot: If you’re thinking about consolidating to a fixed-rate loan, now’s
the time — before interest rates rise further or these changes become law.

“Everybody who was inattentive enough not to have consolidated by July 1 should
probably do so now, because when these changes roll in it’s going to cost them
a lot more,” says Barmak Nassirian, a spokesman for the American Association
of College Registrars and Admissions Officers in Washington, D.C.

Lawmakers got a impression closer to updating the federal student-loan program last
week when the House Committee on Education and the Workforce approved a bill
that would update the Higher Education Act. Lawmakers aren’t expected to vote
on the legislation, or a similar bill in the Senate, until the fall.

“This issue is one of my top priorities, and I’m optimistic the House and Senate
will work together to enact meaningful reforms … by the end of the year,”
says Rep. John A. Boehner (R., Ohio), chairman of the committee.

Preserving Rates

The changes have been proposed as a way to shift spending on financial aid.
Because student loans are subsidized, the government must make up the difference
between the student-loan rate and the rate lenders charge when interest rates
rise. By introducing an adjustable-rate loan option, lawmakers hope to pass
some of that cost onto the borrower.

Federal student loan rates re-set annually on July 1 and are tied to the yield
on the 91-day Treasury bill, which has been rising in line with the Federal
Reserve’s federal-funds target rate, according to John Canavan, bond-market
analyst at Stone & McCarthy Research Associates in Princeton, N.J.

The fed-funds rate currently stands at 3.25%, up from 1% a year ago. “We’re
looking for the rate to end the year at 4.25%,” Mr. Canavan says.

If you took out loans over the last few years when rates were at record low
levels and you haven’t consolidated yet, consider preserving those rates for
yourself now, college administrators say.

The best consolidation rate that borrowers of Stafford loans would qualify
for stands at 4.750%, up from 2.875% last year, for students still in the “grace
period” that borrowers are allowed before they have to open paying back their
loans. For loans already in repayment, the rate is 5.375%. The Parent Loans
for Undergraduate Students (PLUS) stands at 6.125%, up from 4.25%, according
to SLM Corp., better known as Sallie Mae.

Even undergraduates should consider whether consolidating their loans now makes
sense, rather than waiting until after graduation. As this
article explains, more schools have been urging students to consolidate
loans while they’re still in school to benefit from the current low interest-rate
environment. Still, most students who consolidate loans while still in school
lose the grace period. Discuss options with your lender to be sure you have
the resources to make your monthly payments while still in school, or if the
lender offers deferred-payment ideas or forbearance until you’re financially
able to begin making payments.

Know What You’re Getting Into

Under the current rules, if all of your loans are with one lender, you must
consolidate your loans with that lender. If, however, you have loans with several
lenders, or if you have loans directly from the Desectionment of Education, you’re
free to comparison-shop for consolidation loans.

Most schools provide a “preferred lender list,” says Mark Kantrowitz, founder
of financial-aid information Web site FinAid.org in Cranberry Township, Pa.,
and many banks will offer special incentives for borrowers who sign up for automatic
bill-payment, use a lender’s Web site features or make on-time payments. As this
article explains, banks and lenders recently sweetened some of these “borrower
benefits” amid growing competition in the consolidation business.

For example, Sallie Mae recently changed its “Cash Back” incentive so that
borrowers could qualify for cash-back rebates on consolidated loans more quickly
than before. Now borrowers receive the rebate after signing up for the company’s
online account management tool and making 33 on-time payments — before the
lender required 48 on-time payments before issuing a rebate. With Cash Back,
on a $40,000 consolidation loan charging the highest rate of interest allowable
(8.25%), a borrower could qualify for up to $1,320 cash rebate.

But check the terms and conditions of these incentives carefully. Mr. Kantrowitz
of FinAid.org notes that many students eventually trip up with on-time payments,
disqualifying borrowers from the benefits.

Tom Joyce, spokesman for Sallie Mae, says few students do eventually qualify
for incentives because they don’t understand the basic terms of the loan, including
the rate and the monthly payment. “Borrowers need to think about their own behavior,
what they’re likely to qualify for, and whether or not they think they’re able
to make on-time payments,” he says. The most frequently missed payment is the
first one, because students tend to move before the repayment plan starts and
they don’t receive the bill, says Mr. Joyce says.

Finally, consolidating loans may not be the right choice for some borrowers.
The government will forgive all or part of federal education loans if the borrower
becomes a teacher in certain fields or low-income schools, or performs certain
types of public service work, such as military service or volunteer work. If
you consolidate, you may lose that chance at forgiveness –check the fine print.
For a state-by-state listing of teaching positions that qualify for loan forgiveness,
click here, and check out FinAid.org for details on other loan-forgiveness programs.