Students urged to consolidate loans by July 1 to save money

By Brian Benson

With interest rates on the Federal Stafford loan scheduled to be reset July 1, Dean of Student Financial Services Seamus Harreys recommends students consider loan consolidation in the near future.

The interest rate, which is determined by the United States Treasury bill and will never exceed 8.25 percent, is currently 4.7 percent (5.3 percent if the borrower is repaying). Harreys expects this number to increase by as much as 2 percent on July 1, bringing the new interest rate to more than 6 percent.

“If you consolidate, you lock in the current [4.7 percent] rate,” Harreys said.

This increase could cost a student who does not consolidate more than $4,000 for a $20,000 loan over a 10-year repayment period.

“If a student acts before July 1, everything looks like it will benefit the student,” said Harreys, who added that students must have at least $5,000 in Federal Stafford or Perkins loans at the time of consolidation.

However, Harreys cautioned there is no guarantee the interest rate will increase that much or that loan consolidation is right for every student.

“Predicting interest rates is similar to guessing how the stock market will do,” he said.

Additionally, a new bill approved by Congress and President George Bush creates a fixed interest rate after July 1.

“It is likely that if you have debt, this is the last time you will be able to consolidate,” Harreys said.

The new interest rate is scheduled to be announced June 1, giving students until June 30 to consolidate before the new rate takes effect.

However, Harreys said students should begin loan consolidation immediately by contacting their lender.

“Students need to start a conversation with their lender now to start the process,” he said. “If you wait, the phone lines will be packed since everyone will be consolidating [with such a large increase expected].”

If students do not know who their lender is, Harreys recommends they talk to their Northeastern financial aid counselor, who can tell them their lenders as well as what loans go with each lender. Contact information for financial aid counselors is available on the Student Financial Services Web site, www.financialaid.neu.edu.

Karl Punkley, a freshman music industry major, said he had never really considered loan consolidation, but might now.

“It made me think maybe I should pay more attention to this stuff,” he said.

Others, like Kathryn Moran, said their parents pay close attention to financial matters.

“My mom’s all over that

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