Date of college loans determines impact of July 1 interest increase

If you?re borrowing money to pay for college?whether as a student or a parent of a student?you are likely being swamped with direct-mail and telemarketing enticements to consolidate before interest rates increase on July 1.

Should you be paying attention to those enticements?

Only if you have loans that were taken out prior to July 1, 2006, say those who have worked with financial aid at Tabor College.

On Sunday, July 1, interest rates will increase to 7.22 percent for subsidized and unsubsidized Stafford Loans for students and to 8.02 percent for PLUS loans.

In all three cases, that?s an increase of only 0.08 percent from the current fixed interest rate for loans that were made after July 1, 2006.

?For any loans taken after July 1 of 2006, there isn?t a lot of advantage to consolidate because they already have the fixed interest rate,? said Grant Brubacher, director of financial aid at Tabor College.

But if a student or parent has loans made prior to July 1, 2006, it may pay to consolidate because those loans have a variable rate. Consolidating will result in a fixed rate.

Brubacher advises parents who have questions to call the financial aid officer at the school where the student attends. The officer can research your loan history and even calculate the effect of consolidating or not consolidating those loans made prior to July 1, 2006.

He also advised students and parents to stick with their current provider?or at least carefully check into companies offering loan services through mail or telephone solicitation. They may be start-up companies hoping to drum up business through the rate-increase deadline.

Brubacher said students and parents should be aware they may have more than one loan with their current lender?even if they are making only one payment per month.

He said it is a common practice for lenders to lump payments for multiple loans into a single billing?but that doesn?t mean the loans are consolidated.

Again, checking with the lender or the financial aid officer at the college should resolve any questions.

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