Loan consolidation costs rising

Tuition rates aren’t the only increasing costs for college students. A rise in student loan interest rates may have some students and recent graduates second-guessing their decision to consolidate these loans. While consolidating loans can make the repayment process easier, timing is everything. Under a consolidation plan, students can combine
all their loans into one. Instead of making several payments to various lenders, loans are paid back through one monthly payment.

“Every student should sit down with a financial planner before they decide to consolidate,” said Celeste Roberts-Ruffin, assistant bursar at Temple. Ruffin said one of the biggest mistakes most students and graduates make is not reading the loan information thoroughly.

As of July 1, interest rates for Stafford loans rose to 6.54 percent, up from last year’s 4.7 percent. Consolidating at any given time will freeze that interest rate for the life of the loan. With this increase came the news that students who want to consolidate while they are still in school no longer have the option. But students who have already consolidated their federal loans can take advantage of a 180 addendum that allows them six months to consolidate loans that were added after July 1.

According to Ruffin, researching lenders is also key. Some lenders offer specials, such as a quarter percent reduction for on-time payments. Other lenders may offer a reduction of .25 percent for payments through your checking account. Deals like this can add up to a half-percent reduction in the interest rate and hundreds or thousands of dollars in savings over the life of the loan.

Ruffin also stressed the importance of reviewing the various consolidation payment plans available to students. Some plans allow students to pay in direct proportion
to their income while others increase payments with time after graduation.

The federal government offers a six month grace period after graduation until students must begin paying off their loans.”

If you consolidate while in school it automatically puts you into repayment status and you lose your grace period,” said Jillian Delaney, a consolidation specialist for Sallie Mae. Delaney said since rates change every July, those who do consolidate can possibly miss out on lower interest rates.

Ruffin also advises students to keep in touch with their lenders.

“Those six months after you graduate go by so fast,” Ruffin said. Once the grace period is over, students who cannot make their first payment should contact their lender.

“They want their money, they will work something out with you,” Ruffin said.

“Delinquent is what will show up on your credit report if you miss the first payment.”

Renita Burns can be reached at

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