Student loans should be merged soon, experts say

DALLAS -Around this time of the year, anxious high school students find out whether they’ve been accepted by the college of their choice. For their parents, there’s the added anxiety of how to pay for that college education.

If you’ve got college loans, the magic date is July 1 – when the interest rates are set to rise significantly. Experts advise students and parents to consolidate their loans before then to lock in the current low rates.

“The era of historically low interest rates on student loans has ended, and families are extremely unlikely to see rates this low ever again,” says Mark Kantrowitz, publisher of FinAid.org, a college-financing information Web site.

The variable interest rate on existing federal student loans will be recalculated by the U.S. Department of Education on May 30, and the new rates will go into effect on July 1.

Mark Brenner, vice chairman of College Loan Corp., a student loan lender, says the hike will be the “biggest increase in the history of the (student loan) program.”

Rates are expected to rise at least 1.5 percentage points “and maybe as much as 2 percentage points,” says Pat Scherschel, vice president of loan consolidation for Sallie Mae, the largest college-loan finance company.

In addition, interest rates on new loans issued after July 1 will have substantially higher fixed rates instead of variable rates.

The rates on the cheapest money students can borrow – subsidized Stafford loans -will jump to a 6.8 percent fixed rate on July 1 from variable rates that currently are as low as 4.7 percent.

Pamela Tip / Knight Ridder Tribune

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