- The Washington Times - Monday, July 7, 2003

NEW YORK - Jason Manning received a master’s degree in education last month, but he already has a welcome reprieve in repaying his $35,000 student loan debt: His monthly payments are being cut in half, to $150 from $300. . Like thousands of other students across the country, Mr. Manning is consolidating his student loans, taking advantage of record-low interest rates effective July 1. The consolidation allows borrowers to lower their payments and make adjustments to the terms of their loans.

“Right now, with different bills, moving and rent payments, I just thought it was important to have the lowest payment possible coming out of college,” said Mr. Manning, who graduated June 15 from Union College in Schenectady, N.Y., and was planning to start work this fall.

Students and graduates, who typically have one loan for each year of schooling, can consolidate only once under federal law, but doing so allows them to write just one check and lower their monthly payments by several hundred dollars in some instances.

Loans can be consolidated at any time during the year. The application process can be started by calling 800/448-3533, or by going online at www.salliemae.com.

As of July 1, the rates for what are known as Stafford loans have dropped to 3.42 percent for borrowers who already are repaying loans, and 2.82 percent for those in school, in a grace period or a period of deferment. The rate for Parent Loans for Undergraduate Students (PLUS) fell to 4.22 percent.

Stafford loans are guaranteed and are available to all students regardless of financial status. PLUS loans are made to parents whose dependent children are students.

The consolidated loan is issued in the same principal amount as the original loan, but the interest rate changes and is based on the average rate of all the loans being consolidated, said Patricia Scherschel, consolidation product executive for the Student Loan Marketing Association, or Sallie Mae, the nation’s largest provider of student loans.

The loan rates are locked in, putting borrowers at an advantage or disadvantage if interest rates rise or fall in the future.

Mr. Manning, who took out five separate loans, four during his undergraduate years and another for graduate school, said his loan rate was dropping to 2.82 percent from 3.82 percent. He also arranged for direct payment of his loans from his checking account and an extra discount for making on-time payments.

Some lenders take the initiative and call graduates to see if they are interested in consolidating.

Collegiate Funding Service, a private lender in Fredericksburg, Va., called Mr. Manning, who said half the process was accomplished over the phone. By the time the paper application arrived in the mail, all Mr. Manning had to do was check a few options and return the form.

Grant Lee, a recent graduate of Santa Clara University, received a call from College Loan Corp. to consolidate his loans.

Mr. Lee, 22, who received a degree in management information systems, consolidated loans with interest rates ranging from 3.5 percent to 5.5 percent. With the consolidated loan being repaid at 3.5 percent, Mr. Lee said, he will save about $113 on his $23,000 debt.

The fact that borrowers have just one chance to consolidate means they must decide if they want to do so now, or wait another year and see where interest rates are then.

“You have to pick your shot and go for it,” said Jordan E. Goodman, author of “Everyone’s Money Book on College.”

Judy Wilburn of Tulsa, Okla., took out $20,000 in PLUS loans in March 2002 for three sons during five different years. She didn’t think the rates could go any lower and found it difficult to keep up with multiple lenders and payments.

“It was a good move. I feel now we should be able to refinance and could lower our interest by three points,” Mrs. Wilburn said.

After consolidating at 6.785 percent for her PLUS loans, she pays $162 a month compared with $300 before consolidation.

Some lenders sweeten the process by offering extra discounts after a graduate makes 48 monthly on-time payments.

Sallie Mae’s Miss Scherschel says graduates who want to consolidate should keep in mind a few considerations:

• If graduates have trouble making monthly payments or are at risk of late payments on credit and loans, they should consider consolidation to extend their payback periods and lower their monthly payments.

• Those who have high debt but who can make their monthly loan payments may want to consider locking in the low rates and freeing more cash to repay the loan faster.

• A borrower who has just left school and is still in a grace period may want to consider consolidating to lock in the low rates during this period.

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