what you don’t know can sometimes cost you. Take time to sort out fact from fiction with these student loan refinance facts and you can decide if it is a good idea for you:

1. Reconsolidation Elimination. Except for a few very special circumstances, once you decide on a student loan refinance you are “stuck”. Prior to July 1st, 2006 borrowers could refinance as often as desired in order to take advantage of dropping interest rates. Today all that has changed. Now borrowers can only add additional outstanding loans to a student loan refinance and are unable to repeatedly refinance student loans so shop carefully to obtain the best possible rate the first time.
2. Stay Up-to-Date. Borrowers cannot be in default when applying to refinance a student loan so keep those payments up to date. In fact, it’s a good idea to keep your credit score as healthy as possible in order to obtain the best refinance interest rate available.
3. You May Need to Choose Two. If you have both private and federal student loans you may need to seek separate student loan consolidation programs. Be sure to review the requirements and benefits of each program to make sure it provides the best course of action prior to making a decision. Remember, once you make a final selection you will need to live with it for ten years or even longer. Unlike former years it is no longer easy to refinance student loans refinance on repeated basis.

First, even a small rate cut can pay off quickly. That’s because you can easily find mortgage companies willing to waive routine refinancing charges such as application, appraisal and legal fees (which can add up to $1,500 to $3,000). Of course, in exchange for low or no up-front costs, you’ll have to be willing to accept a rate that’s somewhat higher than the prevailing rock bottom.

Second, if you are planning to stay in your home for at least three to five years, it may make sense to pay “points” (a point equals 1% of the loan amount) and closing costs to get the lowest available rate.

And third, you can avoid laying out cash and still get a low rate by adding the points and closing costs to your new mortgage. Does that mean shouldering a lot of extra debt? Not necessarily. If you’ve had your current mortgage for at least three years, you’ve probably reduced your balance by several thousand dollars. So you may be able to tack your closing costs onto your new loan and still end up with a mortgage that’s smaller than your original one — plus, of course, a lower rate and lower monthly payment.

Traditionally, the decision on whether or not to refinance has meant balancing the savings of a lower monthly payment against the costs of refinancing. But in recent years, companies have introduced “no cost” and low-cost refinancing packages that minimize or completely eliminate the out-of-pocket expenses of refinancing. (These refinancing packages compensate with a higher interest rate, or by including some of the costs in the amount that is financed.)

With traditional refinancing, the most often cited rule-of-thumb is that the interest rate for your new mortgage must be about 2 percentage points below the rate of your current mortgage for refinancing to make sense. However, with the newer low- and no-cost refinancing programs, it can be worth your while to refinance to obtain a smaller reduction in interest rates.

How long you expect to stay in your home is also a factor to consider. If you’ll be moving in a few years, the month-to-month savings may never add up to the costs that are involved in a refinancing.

If you are thinking about refinancing your mortgage, you might want to consider other types of mortgages. For example, you might want to look into a 15-year, fixed-rate mortgage. In this plan, your mortgage payments are somewhat higher than a longer-term loan, but you pay substantially less interest over the life of the loan and build equity more quickly. (Of course, this also means you have less interest to deduct on your income tax return.)

You also might want to consider refinancing if you have an adjustable rate mortgage with high or no limits on interest rate increases. You might want to switch to a fixed-rate mortgage or to an adjustable rate mortgage that limits changes in the rate at each adjustment date as well as over the life of the loan.

If you decide to apply for refinancing with a particular mortgage company, and if you do not want to let the interest rate “float” until closing, get a written statement to guarantee the interest rate and the number of discount points that you will pay at closing. This binding commitment or “lock-in” ensures that the mortgage company will not raise these costs even if rates increase before you settle on the new loan. You also may consider requesting an agreement where the interest rate can decrease but not increase before closing. If you cannot get the mortgage company to put this information in writing, you may wish to choose one that will provide this important information.

Most companies place a limit on the length of time (say, 60 days) they will guarantee the interest rate. You must sign the loan during that time or lose the benefit of that particular rate. Because many people refinance their mortgages when rates decline, there may be a delay in processing the papers. Therefore, you may want to contact the company periodically to check on the progress of your loan approval and to see if additional information is needed.

With a lower interest rate on your home loan, you will have less interest to deduct on your income tax return. That, of course, may increase your tax payments and decrease the total savings you might obtain from a new, lower-interest mortgage.

You should be aware of an Internal Revenue Service (IRS) ruling with respect to points paid solely for refinancing your home mortgage. IRS regulations require that interest (points) paid up front for refinancing must be deducted over the life of the loan, not in the year you refinance, unless the loan is for home improvements. This means that if you paid a certain number of points, you would have to spread the tax deduction for those points over the life of the loan. If, however, the loan or a portion of the loan is for home improvements, you may be able to deduct the points or a portion of the points. Check with the IRS regarding the current rulings on refinancing, particularly if you are using the new loan to make home improvements.

This announcement comes on the heels of Senator Edward Kennedy’s own pleas that students take action now before the deadline.

In addition, the lawsuit filed by OneSimpleLoan vs. the Secretary of the Departtment of Education continues to be tied up in legal maneuverings.

This flurry of activity comes in reaction to the Deficit Reduction Act of 2005, which will eliminate a number of student loan consolidation benefits, such as in-school and spousal consolidation. Of far greater impact to borrowers is the anticipated jump in Stafford and parent PLUS loans.

The current interest rate formula for Consolidation Loans, in which borrowers lock in a fixed interest rate, deprives some borrowers of the benefit of falling interest rates while increasing Federal interest subsidies to lenders on other loans where borrower rates are fixed at a low level.

The 2006 budget request would replace the current fixed-rate interest formula for Consolidation Loans with the variable rate formula used for student loans, placing current and former students on equal terms.

Note: If you’re thinking about consolidating your student loans, you are strongly encouraged to do it now, before you miss out on locking in today’s historically low fixed rates for the life of the loan. A variable rate means your interest rate may fluctuate year-to-year, thereby increasing your interest fees you’d have to pay. Please apply today.]

Currently, borrowers wishing to consolidate may face complicated procedures and limited choices. The Administration proposes to eliminate all barriers to consolidation or reconsolidation, including the statutory provision limiting a borrower’s ability to choose their consolidation lender.

For borrowers reconsolidating previous consolidations, the budget also would create a 1 percent origination fee in recognition of the financial advantage of reconsolidation. Similarly, the current one-time lender fee on all new Consolidation Loans would be increased from 0.5 percent to 1 percent.