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COLLEGE COSTS
Act now — or lose thousands
BY DAVID S. BERNSTEIN
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If, like many college students and grads, you have several sizable student loans, pay attention: in three weeks, the federal government will dramatically raise the interest rates on new student loans, including loan consolidations. If you consolidate into a single, fixed loan before July 1 — when the rate is expected to go from 2.77 percent to roughly 4.75 percent — you’ll save about $1700 over 10 years on $15,000 worth of loans, estimates Christine McGuire, director of financial assistance at Boston University. McGuire recently sent an e-mail advisory to all BU’s student borrowers, but she fears many people won’t find out until it’s too late. And the rate, which is adjusted every July 1, will only rise further. "They’ve been historically low," says McGuire. "The chances that the rate will ever be 2.77 again are slim." "Lenders tell me their consolidation volume is up 45 or 50 percent" as people rush to take advantage, says Mark Kantrowitz, president of MK Consulting in Cranberry Township, Pennsylvania, and publisher of www.finaid.com. Even currently enrolled students, who aren’t paying back their loans yet, can consolidate — though at a cost: they will lose the post-graduation six-month grace period before beginning repayment. There’s another good reason to consolidate soon. The Higher Education Act is up for reauthorization, and Congress is considering eliminating fixed-rate student-loan consolidations. That will put more young adults at the mercy of rising interest rates, warns Kate Rube of the State PIRGs’ Higher Education Project. "In the next couple of years, not only are families going to be facing higher tuition costs, but also higher interest rates, which is going to make the cost of higher education even higher," Rube says.
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