While many CSUN students were enjoying summer days away from the joy and toils of university life, their financial future may have become far more difficult in the course of a single day. For many, college became dramatically more expensive.
That fateful day having come and gone, those who failed to consolidate student loans have to pay higher interest on loans borrowed before July 1.
On this day, interest on all Stafford student loans increased to a fixed rate of 6.8 percent, while all PLUS loans, money parents can borrow, increased to a fixed rate of 8.5 percent as a result of the Deficit Reduction Act, singed into law by President Bush on Feb. 2.
Students who borrowed money beforehand had the option of consolidating their loans down to a single fixed rate of interest, thereby saving money upon repayment.
Now it is too late, however, and a few CSUN students will be the last graduates to pay high rates that change every three weeks based on Treasury bill auctions.
These auctions are a measure of the supply and demand for money in the marketplace, said finance professor David Russell. He said student loan rates are also affected by the Federal Reserve when it decides to manage the nation’s cash flow.
Gregorio Alcantar, a CSUN debt management counselor of financial aid, said from now on students’ consolidated interest rates would be determined by the average interest of all their loans to the next one-eighth of a percent and would be locked into place thereafter.
It is likely that many students would have had the option to consolidate several loans, as federal aid has yet to keep up with the rising costs of education, Alcantar said. Of the 60 percent of CSUN students who receive aid, about half of them borrow money.
Under the new law, federal loan subsides to lenders were cut by $12.7 billion so as to control record deficit spending. Richard W. Moore, who used to advise former President Bill Clinton on student loan issues, said the law is an effort by the federal government to appear to be fiscally responsible by cutting social programs such as loans.
There will be more money available starting next year for first and second-year students who qualify for subsidized and unsubsidized Stafford loans to borrow, though.
Last semester, they helped finance five financial aid workshops and invited a financial consultant to campus to speak, said USU program coordinator Carole Desgroppes-Brown, events which all received lower attendance than was expected.
“There was a time when people came in and inquired about these loans, but when they’re on the phone on June 30 at midnight it’s very unfortunate,” Alcantar said.
While they may not seem interested with the details of their loans, 97 percent of CSUN students pay off their loans, financial aid office statistics show.
Wells Fargo counselor Tyrone Black, who advises students about loans during workshops held regularly at Bayramian Hall, said students can still save money if they missed out on consolidation by being consistent in paying off their loans after graduation, as some lenders reduce rates after a certain amount of payments.
“The only thing I can say to those students is to borrow wisely and only what they need, so that when they pay off their loans, the debt is manageable,” Alcantar said.