Question: All my student loans are federal loans through Sallie Mae and have a fixed 6.8% interest rate. I can afford the monthly payment, but the interest is just so high! Will consolidating give me a better interest rate?

It depends on when you took out the loans. Any federal loans taken out before July 2006 have variable interest rates. Consolidating these loans after July 1 of this year will reduce the interest rate to 2.6% from its current 4.2%, predicts Mark Kantrowitz, publisher of FinAid, a Web site that tracks the college financial aid industry.

The loans that you took out after July 2006 are a different matter. These loans have a fixed interest rate of 6.8%, and there’s not much you can do about it. While there has been some discussion in Congress about allowing past borrowers to re-consolidate at these rates, the talk hasn’t gotten serious because the interest payments help support the Pell Grant program, Kantrowitz says.

Your best strategy might be to prepay the loan by increasing your monthly loan payments, if you can afford it. That will whittle the principal down faster and reduce the amount of interest that you pay over the life of the loan.

Even though some private student loan companies may advertise loans with variable rates below 6.8%, you should generally steer clear. As many mortgage borrowers found out the hard way, low teaser rates often reset after a few years and climb much higher.

Unfortunately, many students don’t have access to the right information and counselling that they need in order to make the right decisions about how to pay for college.  Here is some quick advice to those of you out there who are thinking about a private student loan.

Be sure that you have completely exhausted all other financial aid options.  Private student loans should be used only as a last resort.  Consider looking into federal Pell grants, federal student loans such as Stafford, Perkins, and Grad PLUS.  Always look for scholarships and be willing to accept work-study as well. Private student loans usually carry higher interest rates and have less options for repayment.

Figure out exactly how much money you will need to go to college.  Financial Aid is based on an award letter which is equal to the cost of attendance minus and sources of financial aid.  Once you know this number, you will be able to make better decisions about how to pay for it.

Find yourself a creditworthy co-signer.  The lending world is now largely requiring that as a person with little or no credit history, you will need someone to cosign the loan with you.  The better their credit, the lower your rate will be and the more likely it will be that you are approved.  Find the person before it gets to be crunch-time.

FInally, ask your schools financial aid office who they recommend.  Every school should have preferred lenders and thanks to crackdowns, they should be the best products available.  Once you have the list, do some research for yourself.

College loans are the first of many extremely important decisions you will face as you head out into the world.  Understand what you are getting yourself into and be prepared for what lies ahead.  Good Luck.

Cost has always been a major factor for families when choosing a college.  This year it has moved to the top of the list for many high school graduates who are trying to decide where to head in the upcoming years.  Application figures won’t be available for a few months, but state public colleges across the country are reporting record turnouts at college fairs and open houses.  Financial aid officers have been extremely busy with more and more students and parents asking about financial aid and loans.  It seems that all the focus is on the economics of an education this year, and that trend is sure to continue.

Many private colleges are reacting to this situation by expanding financial aid packages in an attempt to avoid losing the families who are on the fence and might be priced out of attending.  Some private colleges have begun to impose a hiring freeze and have stopped construction projects in anticipation of the need to increase financial aid to the students.

There is no doubt that cost is becoming one of the major factors in the minds of students and families.  This may end up being a good thing for everyone as the cost of college has ballooned over the last 5 years.  Perhaps colleges, both private and public, will start to bring costs down to a manageable level so that a degree is once again possible for everyone in this country.