- The Washington Times - Thursday, June 29, 2006

Former and current students are rushing to beat a deadline tomorrow to refinance their college loans before a big interest rate increase kicks in.

“That’s why we’re inundated,” said Paul Simino, president of OneSimpleLoan, a Tampa, Fla., student loan consulting firm. “We’ve hired an additional 60 people to help out.”

A change in federal rules means adjustable rates for the interest on Stafford loans no longer will be available. Instead, borrowers must pay interest at fixed rates, which will rise nearly 2 percent to about 7 percent beginning tomorrow.

Stafford loans are the most common federally guaranteed loans used by students.

Interest rates are rising by 2.4 percent on PLUS loans, which refer to the federal Parent Loan for Undergraduate Student program that parents can use to pay their children’s college expenses.

Unlike previous years, when the interest rates fluctuated annually, the new fixed rates will not change.

The difference in debt can be large.

A $50,000 student loan paid off over 25 years at the higher interest rates that begin tomorrow would cost the borrower as much as an additional $21,000, according to OneSimpleLoan.

About two-thirds of college students graduate with debt, which the Department of Education said averages more than $17,000.

Graduates of the most expensive universities could pay substantially more.

Michael Akin, a 2003 graduate of George Washington University, refinanced his federal student loans two years ago at 3.5 percent and said he thinks he is getting a good deal with the $300 a month he pays on his 20-year loans.

“I’m paying them off but I’m not breaking the bank,” said Mr. Akin, who works in the community and government affairs office at the university.

Tuition at George Washington University can run as high as $40,000 a year.

His girlfriend, a law student, refinanced her $18,000 of federal student loans last week to beat the July 1 deadline.

Despite the debt, Mr. Akin said he received “a lot value for the money.” The $50,000 in loans he assumed “gave me a degree, a job and a girlfriend,” he said.

Higher interest rates also worry students whose debt still is rising.

Jordan McNerney, a 21-year-old senior at George Washington University, said he is “absolutely concerned” about rising interest rates on student loans he must repay beginning next year.

So far, he has amassed about $86,000 in Stafford and private bank loans as he pursues a bachelor’s degree in political communications.

“Every year I’ve just seen my loans get bigger and bigger,” Mr. McNerney said. Although he has not calculated the exact amount of interest he must repay, “I know that it’s a lot.”

Citibank officials say they have been preparing for the rush of consolidations to beat the July 1 deadline by ensuring their telephone help lines operate with an adequate staff.

“As anticipated, and like last year, we have seen a dramatic rise in the number of incoming calls due to people calling to consolidate,” spokesman Mark Rodgers said.

The bank loaned $10.8 billion to college students last year.

Bank of America reports a “significant increase” in loan consolidations before the deadline, said Tracy Grooms, the bank’s student-lending executive.

Even if borrowers do not sign the refinancing contract by today, they could get the lower interest rate if they at least reach an agreement with lending institutions.

“As long as the student has been in touch with an agency that can consolidate, the actual paperwork does not have to be completed by July First,” said Dan Small, George Washington University’s director of student financial assistance.

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