consolidation loan refinance student

Clock ticking before college loan changes

Thousands of college students and graduates are rushing to beat a July 1 deadline to refinance their college loans. The students and graduates are hurrying to change their loans before an interest rate hike that could cost them thousands of dollars.

At the stroke of midnight July 1, interest rates for current student loans will go from 4.7 percent to 6.54 percent. Loans for students who have already graduated will spike from 5.3 percent to 7.14 percent. Anyone with a variable rate school loan will have to pay the increased rate.

They do have another option, though, experts say. If they consolidate their loan now, before July 1, they could preserve the current low rate. Consolidation takes all of their college loans and combines them into one loan with a fixed rate. If they consolidate before July 1, students will preserve the current low rate for life.

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Students Rushing to Complete Consolidation before July 1 Deadline

With interest rates rising nearly 2 percentage points on July 1st, students and recent graduates rushing to refinance their loans have been inundated with mail from consolidation companies looking for business.

The Chronicle of Higher Education reported that two of the largest consolidation companies reported ‘a threefold increase in call volume' in the past few weeks. Financial-aid advisers have been alarmed by aggressive, and at times, misleading language used by consolidation companies looking to cash in during the rush. They advise confused borrowers to proceed with caution and fully understand the fine print of offers they receive.

Financial-aid advisers expect consolidation to continue - albeit at a slower rate - after the deadline. Congress recently repealed the ‘single-holder' rule meaning that borrowers in the guaranteed-student-loan program will now be able to consolidate with the company of their choice.

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