As seen on CBS Market Watch, information provided by the Wall Street Journal

A year ago, college students consolidated education loans in droves to lock in the lowest interest rates in the federal loan program’s 40-year history. Now, students and parents are once again being advised that if they have any Stafford loans left to consolidate, do it before July 1st. I spoke with the Wall Street Journal’s Kelly Spors about why this may be the last time to use consolidation to lock in low rates before they go up and changes in the program kick in. Kelly, you say if you want to consolidate your student loans, time is of the essence—you’ve got to act now. Tell us about it.

Kelly: In part of the deficit reduction act that was recently signed by President Bush, there is a measure that eliminates consolidation starting July 1st of this year. This means for students that are still in school and have loans and can now consolidate, they won’t be able to do that after July 1st.

Give me the reasons why it’s a good idea to consolidate your student loans.

Kelly: Well, the big advantage right now is that loan rates are variable, so by timing your consolidation, you can lock in a low rate on the loan. Another advantage to this is you can take all your loans and wrap them into one new monster loan and have one monthly payment.

Okay, of course then, the interest rate environment will dictate whether it’s a good idea to consolidate.

Kelly: Right, a lot of people have been consolidating the last couple of years because the interest rates have been so low.

Right, and perhaps with the thought that interest rates are just going to be inching higher, people are trying to do it now before this June 30th deadline.

Kelly: Exactly. The rates are expected to go up.

What are the rates currently on student loans?

Kelly: Currently, on federal student loans the rates are 4.7% if you are in school or in grace period and 5.3% if you have graduated.

What are they pegged to?

Kelly: They’re pegged to the 91-day treasury bill, and they are reset usually every July 1st.

Okay, now some big changes are occurring because these rates are going from being variable rates to a fixed rate as of July 1. Tell us what we can expect.

Kelly: Right, this is another part of the deficit reduction bill. Starting July 1st, the rates on student loans are no longer going to be variable, they are going to be fixed at 6.8% and that is not going to change, that’s going to be the rate for the life of the loan.

And that, we should make this clear, is only for new borrowers.

Kelly: Right. Anybody who has existing loans, those are going to continue to fluctuate every year.

Okay. So again, if you are a student currently and you don’t consolidate your student loans by July 30th, when is your next opportunity to consolidate your loans?

Kelly: It’s going to be after graduation.

Is there any grace period there or is it right after graduation?

Kelly: Right after graduation. So, if you have a loan now and you’re not consolidating now, you’re going to have to wait, sometimes one to three years, to consolidate that loan, which is why now is really a good time if you’re going to consolidate to do it.

If you decide to consolidate, you must start with the lender that provided your loan. If you have loans from multiple sources, you’re not tied down and can shop around for the best deal or service. Many lenders, for instance will shave a quarter point off the interest rate if you repay the loan through automatic withdrawals from your bank account. To learn more about consolidating your student loans, just log on to www.wsj.com.