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And she’s expecting many more before the month ends.
Sullivan, an education loan supervisor at the La Crosse Associated Bank, is hearing from people with federal student or parent loans who are worried about what the July 1 interest rate change — nearly 2 percent in some cases — will mean for their wallets.
The increase means a borrower still in school will pay 6.54 percent in interest, up from 4.7 percent.
A graduate already repaying loans will pay 7.14 percent interest, up from 5.3 percent.
And those with parent loans will pay 7.94 percent interest, up from 6.1 percent.
The interest rate for federal student loans changes annually July 1, and is based in part on the government’s 91-day Treasury Bill. The May bill, which was announced Tuesday, is used to set the rate for the entire year.
This is the second year interest rates have increased by nearly 2 percent, Sullivan said. Interest rates for private student loans do not follow the same regulations.
Financial aid counselors such as Sullivan recommend those with federal loans consolidate within the next 30 days.
Loan consolidation helps by locking in a lower fixed interest rate, and in theory makes repayment easier, either by lowering monthly payments or combining multiple payments into one.
For instance, a borrower with a student loan who now is paying 5.3 percent interest can lock in a fixed rate of 5.375 percent. Consolidating will lock in a 4.75 percent interest rate for a continuing student and 6.125 percent rate for a parent loan.
The American Education Services, a national financial aid services organization, estimates a borrower can save an average of $5,580 in interest on a $25,000 loan by consolidating this month.
Sullivan cautioned that consolidating can lengthen the period of time a borrower has to repay the loan. If a person pays only the minimum monthly payment, he or she could pay more in interest than needed, she added.
“That’s the downfall of consolidation,” Sullivan said. “But the nice thing is that there never is a prepayment penalty. Just because you have 20 years, you don’t have to take 20 years to repay it.”
Those interested in consolidating should contact their original lender for information about how to apply for an application. If students have all their loans through one company, federal regulations require borrowers to consolidate with that company.
While it takes two to three weeks for the application to be processed, lenders go by the date it is received, Sullivan said, and not the day the application is processed.
Kate Schott can be reached at Kate.Schott@lacrossetribune.com or (608) 791-8226.
