For most seniors, the final disbursement of financial aid arrived March 25 to fulfill their tuition and fee obligations for the term. If the seniors are lucky, they may receive a little extra cash to help them make it through the next 12 weeks.
But after they graduate June 11, these future employees will be handed more than a diploma: They will also be handed a bill for the financial aid they received that could reach higher than $250 per month.
With interest rates possibly set to rise July 1, graduating seniors may want to consider consolidating their loans now to save money.
Loans in repayment are currently set at 3.337 percent. New loan rates are set every July 1 based on 13-week Treasury Bill Rates. These rates have been climbing steadily during the past nine months and, according to Jonathan Rudy, director of customer service at www.studentloanconsolidator.com, this could mean a 52 to 64 percent increase to make loan rates as high as 5.5 percent.
“For students with an average of $30,000 on loans, the rate increase will translate into an extra $1,018 in interest paid every year,” Rudy said.
Students with federal subsidized and unsubsidized loans have a six-month grace period to begin repayment; Federal Perkins loans have a nine-month grace period. Rudy said that students who consolidate prior to July 1 might lose these grace periods, depending on whom they choose to consolidate through.
Direct Loans is the source of funding for students receiving financial aid at the University. According to its Web site, www.loanconsolidation.ed.gov, students who consolidate prior to graduation may be able to keep their grace periods. However, students need to shop around for the consolidator that will best suit their needs.
One consideration when shopping for a loan agent is to look at minimum loan amounts. Some consolidators will not take loans with a balance of less than $7,500. Another problem could be the chance of losing future deferrals in the event of
life changes.
“Students are entering into a long-term relationship with their loan agents,” Rudy said. “While we would love to have their business, we might not be the best fit
for everybody.”
Also on the way is President George W. Bush’s proposed budget for 2006. The Bush administration is recommending changes to the loan consolidation program that would eliminate fixed rate consolidations, instead keeping loan rates variable with an 8.25 percent cap. Variable rates fluctuate with the markets, causing potential upward and downward swings. These changes could cost students thousands of dollars every year if they don’t consolidate at a fixed rate before the new budget is approved.
“There’s absolutely no reason for graduates not to consolidate their loans,” Rudy said. “However, they need to act now.”
But according to the Direct Loans Web site, if students have the possibility of repayment through a variety of government programs, such as Americorp or a qualified teacher loan repayment plan, they may lose that opportunity if they consolidate their loans.
The University Office of Student Financial Aid and Scholarships, although not able to offer loan consolidations, can help students sort through the mountain of questions they may have. The office’s Web site is financialaid.uoregon.edu. While graduating seniors may be tied up with final papers and job concerns, they should still make time to prepare financially,
Rudy said.
“The most important thing is not to wait until the last minute,” Rudy said. “If you procrastinate, it could be very costly to you in the future.”

[email protected]