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Interest rates are going up on student loans, and college students and graduates are running out of time to lock in low rates.
Procrastination, often a way of life in college, will be costly this time around.
"A lot of people have got a shock coming," second-year Lower Columbia College student Betty Keolker said.
Second-year LCC student Jordan Reed, 22, just arranged for two student loans totalling $3,250. He hadn't heard about the June 30 deadline to lock in his 4.7 percent interest rate.
"My dad is in debt because of student loans," Reed said, figuring its time for him to consolidate his loans at low, fixed rates.
A combination of rising interest rates and legislative changes will make new loans more costly and make existing loans more expensive after June 30.
Every July 1, the Treasury Department adjusts the interest rates on existing Stafford loans -- the government-guaranteed student loans that 44 percent of full-time undergraduates rely on to pay tuition bills. For the second year in a row, Treasury bill rates have jumped nearly two percentage points, taking Stafford loan rates along with them. Last June, rates on Stafford loans in repayment stood at 3.37 percent. On July 1, they are forecast to top 7 percent.
Also, Congress in 2002 mandated that all new Stafford Loans issued after this July 1 will carry a higher, fixed interest rate of 6.8 percent.
The other major student loan program --- the so-called Parent Loan for Undergraduate Students, or PLUS loans --- also will experience similar increases. Interest rates on existing loans are expected to rise from 6.1 percent to 7.94 percent, while new PLUS loans will have a fixed rate of 8.5 percent for most borrowers.
Students like Keolker and Reed, who already have government loans, will continue to receive variable interest rate changes every July 1 unless they consolidate loans by June 30. Predicting future interest rates is difficult.
"It's hard to predict how much," said Kay Lewis, University of Washington director of student financial aid. But "interest rates in general have been going up."
By consolidating loans before July 1, students can convert variable-rate loans to low fixed-rate loans. Borrowers can consolidate loans with any lender, now matter who holds their current loans. The easiest way is to apply online.
Changes in the student loan programs stem Congress decision in December to cut $12 billion from student financial aid programs. This year, the federal government budgeted more than $78 billion for 9 million students, according to the Sallie Mae Foundation.
Married loan recipients should know that after July 1 they no longer can combine their separate loans into one single loan.
Also, for students enrolled now, this is their last chance to consolidate loans and still be able to put off payments until after graduation. With all the changes, the office of financial aid at LCC is bracing for a barrage of student queries.
LCC loan coordinator Betty Sjoblom said she hasn't seen many confused students, yet.
"I think we'll see quite a few students coming in with questions," she said, "hopefully before the end of the month."
Sjoblom advised students to be cautious about what they borrow: "Don't borrow what you want; borrow what you need."
That was Keolker's strategy. She said she borrowed minimally.
"I was hoping not to need a loan," said Keolker, 43. "Now I want to get through this with as little debt as I can."
Share your thoughts with other readers of this story. After your comment is approved, it'll appear below.
Leafgreen wrote on June 24, 2006 11:42 PM:" I am a grad and need to consolidate my loans before the deadline of June 30, 2006 when the rates go WAY up! So I went on a google hunt (I mean search ;). Unfortunately, now google has succumbed to a bunch of organic (regular results below the ads) search spammers. But eventually, I did find a site that has rated a few student loan consolidators, and says they have checked them out. Here's the web page: http://lendersrated.com/index.htm#student Hope it helps you... Leafgreen"
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