If you are still carrying a few student loans from your college years, this might be the time to consolidate. Variable interest rates on federal student loans dropped to an all-time low of 3.42 percent last week.

Since federal law currently allows for just one consolidation of loans, this is the time to do it. Usually graduates have just 10 years to repay their loans. By consolidating, graduates can choose from among four different repayment plans which carry a term of anywhere from 10-30 years, and lock in the low interest rate for the entire period. Students typically have one loan for each year of school.

The new interest rate applies to loans known as Stafford Loans, which are available to all students regardless of financial situation. The interest rate on Parent Loans for Undergraduate Students (PLUS) dropped to 4.22 percent. PLUS loans are granted to parents whose children are students.
Keep in mind that consolidating locks you in to the current rate, so if the rates go lower, you are stuck. If you have already consolidated, you are also out of luck — federal rules allow just one consolidation of student loans.

The one-time consolidation rule could change if Rep. Rosa DeLauro (D-CT) has her way. She introduced a bill last week that would allow loan holders to refinance consolidated loans at lower interest rates. Those lending the money don’t agree.

"Creating a reconsolidation program can have an adverse impact on current and future students by using scarce federal resources for existing borrowers," John Dean, special counsel to the Consumer Bankers Association, told U.S. News.com.

The race is now on among lending institutions to get to those loan holders who would benefit from consolidation. Last month Sallie Mae, the nation’s largest holder of student loans, prevailed in a suit brought by San Diego-based College Loan Corp., which charged Sallie Mae with illegally trying to steal its student loan holders.

To determine eligibility for consolidation, the U.S. Department of Education suggests loan holders go to www.loanconsolidation.ed.gov. Loans can also be initiated by phone at 800.448.3533 or at www.salliemae.com.