Borrower benefits, or loan discounts, can save you money on your loan. Review the example below to see how borrower benefits can change the pricing on a loan. Common borrower benefits include:

• Rate reductions
• Waiver of fees
• Principal reductions
• Cash rebates
• Waiver of final payments

There are some benefits that you get just for taking a particular loan, while others you must earn. Lenders can require you to follow certain rules in order to qualify, such as using a bank account to automatically pay (debit) you monthly payments and/or making all of your loan payments on time.

Borrower benefits can have a significant impact on a loan's total cost, monthly payments, APR, and more. The following illustrates how a sample $5,000 loan differs on monthly payment, total cost, number of payments, and APR once various types of borrower rewards are applied.

Sample $5,000 Loan - Examples of Possible Savings for Typical Borrower Rewards

	No rewards	On-time payments 3.75% Principal Reduction after 36 on-time payments	Auto-debit of payments 0.25% Interest Rate Reduction for automatic debit of payments
Monthly Payment	$61.19	$61.19	$61.19
Number of Payments	120	116	114
*Total Cost of Loan	$7,342.95	$7,044.85	$6,938.36
1st Payment Due	Sep 2010	Sep 2010	Sep 2010
APR	5.39%	4.92%	4.74%

*The Total Cost of the Loan will change based on a combination of the monthly benefits and APR for each type of reward.

To qualify for borrower benefits, you may have to meet criteria specified by the lender. Some examples of these requirements are:

• A certain number of consecutive, on-time payments
• Automatic direct debit of your monthly payment from a checking or savings account

Check with each lender to see how and if you qualify for borrower benefits offered.

Borrower benefits can make a significant difference in the cost of your loan. Make sure you research the fine print on a lender's borrower benefits, and follow any requirements set by the lender to qualify. Industry reports suggest that only 10% to 20% of borrowers actually achieve borrower benefits. Lenders are often counting on borrowers not earning the benefits – prove them wrong! Here are some potential pitfalls:

• Failure to continuously pay on time
• Discontinuing the use of automatic payments from a checking or savings account for the monthly payment
• Not understanding the definition of "on-time" payment
• Cancellation of borrower benefits by the lender or the sale of the loan to another lender
• Failure to continue to meet the requirements for the borrower benefits means you may owe the lender the amount saved from using the benefits.

For more information on borrower benefits, check with your lender.

If you only have newer federal loans (issued on or after July 1, 2006), then it doesn’t matter when you consolidate. These loans have fixed rates, so you won’t benefit by consolidating at a particular time when rates might be lower. If you have older federal student loans (issued before July 1, 2006), then timing can be important.

There are three general time periods to consider for federal loans issued before July 1, 2006:

• You are still in school
• You have left school, but haven’t started repayment
• You are in repayment

For either older or newer federal student loans, if you're still enrolled in the program for which you borrowed, you can't consolidate. If you have graduated or left school, but have not started repayment, your federal student loans are in a grace period. Your grace period interest rate is lower than the one you will carry once you enter repayment. If you consolidate during your grace period, you could lock in that lower rate.

Early 2008 update: it might make more sense to wait until you are in repayment and rates have adjusted to an expected (though not guaranteed) lower level as of July 1, 2008.

If you are in repayment, you may consolidate at any time. However, there are still some timing factors to consider. On July 1st of each year, interest rates for older federal student loans are reset. Keep an eye out for information about what the new rate will be.

Early 2008 update: indications are that rates will decrease in 2008, so consolidating after July 1st will enable you to lock in the (expected – but not definite) lower rate.