The hard part is over, right? Graduation papers have been filled out and turned in, the pre-requisites were years ago, thousands of dollars of the federal government’s money has been spent…
But now it has to be repaid.
Students who have taken out federal student loans over the years have a six-month grace period after graduation before repayment, during which time the interest rate on the loan, currently at 2.77 percent, stays the same.
When repayment starts, the interest rate rises to 3.337 percent. But that may change after July 1. The interest rate on student loans is determined by the U.S. Treasury bills, which have been steadily rising, and will put the expected interest rate in the neighborhood of five percent.
That makes a difference of about $3,500 on a student loan of $20,000 being repaid over the usual 10-year life of a loan.
Consolidation is an option that can save students a lot of money, according to Samantha Howard, who is a coordinator for the Student Loan People. Howard believes that consolidation can be a beneficial move for some students.
“If you have multiple loans, it can be a good move,” she said. “It will lower your payments and lock in a lower interest rate.”
Howard also cited the interest rate as a reason why students should think about consolidation. “This is the lowest its been in the Stafford 40-year history,” she said.
The Web site for Great Lakes, another student loan company says, “Consolidation loans help members with high student loan balances manage their debts with longer repayment terms, resulting in lower monthly payments.”
But once you consolidate your student loans, you lose your grace period and have to being repayment right away. This process is only available to students who have graduated and are beginning the repayment process.
“If you only have one lender, you have to consolidate through that lender,” Howard said. So, those who have only one lender “…don’t have to think about it.”
Some student loan organizations, such as the Student Loan People, have what they call a “weighted average.” This means that if a student decides to consolidate, the loan organization will wait until July to set the interest rate.
If the rate will be lower before July, the company will go ahead and put the consolidation through, locking in the lower rate.
If a better rate can be obtained after July, then they will wait to consolidate at that point.
“We really do try to look at a student’s lending history and see what’s best for them,” Howard said.
Freshman nursing student Carly Mulligan has had a good experience working with the Kentucky Higher Education Assistance Authority (KHEAA) student loan program.
Mulligan said she currently has about $11,000 out in student loans, with another $1,700 for the fall semester.
“They mail me my interest statements every month,” she said. “I call them, and they’re really nice. I’ve never had a problem.”
The Office of Financial Assistance on campus doesn’t deal with loan consolidation, but did recommend two companies to use: Great Lakes and KHEAA. The Student Loan people are affiliated with KHEAA.
For more information on the individual companies, Great Lakes can be found online at www.mygreatlakes.com.
The Student Loan People can be reached for questions about KHEAA loans or a loan through them at 1-888-678-4625. “We’ll answer questions about benefits, grants, anything,” Howard said.