If you have a student loan, chances are you have earned a degree in confusion.

And for good reason. First, there are lots of players -- universities, private lenders, collection agencies and the federal government. Add in the normal bureaucratic nonsense, and it's no wonder that borrowers -- students and parents -- don't really know enough about the federal student loans they are taking out. They just know that borrowing is the only way to afford college. So they sign the loan documents, figuring they will deal with the confusion later.

One area that is particularly confusing is the federal consolidation program. For example, many borrowers, who have already bundled their student loans into a single fixed-rate loan with one payment, are confused about letters they've been getting from lenders looking for business from them.

"These days I am bombarded with offers from financial institutions to refinance my loans," wrote Myriam Contiguglia of Rochester, N.Y. "What a fantastic opportunity. With a lower rate I could start to think about buying a house."

Contiguglia graduated in the early 1990s after six years of college. She couldn't afford the $700 student loan payment on a $19,000-a-year salary. So she consolidated her loans to reduce her monthly payment. Her interest rate at the time: 8.5 percent.

In recent years, student loan rates have dropped to historically low levels, under 3 percent for many borrowers. Contiguglia wanted to refinance her consolidated loan to take advantage of the low rates. But when she called the lenders who contacted her, she was turned down. And why?

Unlike home mortgages or even car loans, you can consolidate your federal loans only once, unless you have new loans that were not included in the original consolidation.

Jim, a reader from Buffalo who witheld his last name, is as confused as Contiguglia. He has a daughter in a similar situation. He wrote: "My daughter has a student loan, which she consolidated seven or eight years ago when interest rates were in the 8.5 percent range. It would seem to me that something should be available to her and it would be worth pursuing as the savings would be substantial. What can or can't be done in this situation?"

Contiguglia is stuck with that 8.5 percent rate. So are Jim and his daughter unless they find some non-government way to refinance.

"To say it is demoralizing every time I see an offer in my mailbox is an understatement," Contiguglia wrote.

If you're in this predicament, I am truly sorry for you. But if you want the law changed you'll have to contact your representatives in Congress. There have been attempts to repeal the rule prohibiting refinancing of student loans. But the bills haven't gotten very far thanks to heavy lobbying by lenders, who don't want people refinancing and messing with their nice plump profits.

However, when it comes to consolidation, some rules do change -- causing more confusion, of course.

The Department of Education recently clarified that students borrowing under the Federal Family Education Loan Program who are still in school can consolidate their loans to take advantage of the current low interest rates.

It's a good thing, because for the first time in five years, the interest rates on student loans will be going up. Effective July 1, the new variable rate on federally backed student loans will increase by 1.93 percentage points to 4.70 percent for in-school borrowers and those in their six-month grace period. The rate will also rise by 1.93 percentage points to 5.30 percent for borrowers currently in repayment. The rate on Parent PLUS loans will rise to 6.10 percent.

Students still in school who want to lock in the lower rates have to act before June 30. (And don't wait until June 30. Procrastinating could cost thousands of dollars over the life of the loan.) There is a downside to consolidating while you're still in school (you knew there had to be a catch). Typically, borrowers get a six-month grace period after graduation before they have to begin repaying. Consolidation eliminates the grace period.

However, even though students give up the grace period, they still won't have to start making payments until they leave school if they request an in-school deferment.

Marlene of San Diego asked, "What if you have all your loans with the same lender? Can you shop around for the best consolidation terms?"

Now the logical, free-market answer should be yes, right? But of course it's not that simple.

If all your loans are held by a single lender, you are required to consolidate with that lender. If your lender doesn't consolidate, or your loans are held by multiple lenders, only then can you shop around.

If you still have questions or are confused about your student loan, contact the Department of Education's Federal Student Aid Ombudsman at www.ombudsman.ed.gov or call toll-free 877-557-2575.

Penny Pincher Contest

It's time for my Penny Pincher of the Year contest. All you have to do is nominate someone with an original penny-pinching strategy -- a friend, a relative, even yourself. Edited versions of entries may be published. Only e-mail entries will be accepted. Send your entries by June 20 to colorofmoney@washpost.com. Please put "2005 Penny Pincher of the Year Contest" in the subject line. Include your address and daytime and evening phone numbers.

* On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online at www.npr.org.

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