In November, for many of the more than 7,000 SF State students expected to graduate this year, the true cost of their time in college will become a reality for the first time.

In as little as six months after graduating - or falling below half-time student status – government-subsidized loans taken by more than half of all college students will start to become due in November.

And for many, this will mean monthly payments totaling hundreds of dollars.
SF State Student David Horvath, 25, is graduating this year with a degree in cinema studies. He said he thinks student loans are a good deal.

“It’s an investment in the future,” he said.

The average college student in American who takes loans to finance their education graduates with $10,000 of debt, a National Center for Education study says. The Higher Education act of 1965 offers graduating students, or students who are already repaying their student loans, the opportunity to consolidate eligible debts and take advantage of fixed interest rates, which often results in lower payments.

Horvath expects to consolidate his student loan debt and find a better interest rate after he graduates, he said.

But he better act fast.

On July 1, the interest rate and future payments on student loans are expected to rise as much as 2 percentage points for the first time in five years. The Congressional Budget Office also expects that student loan interest rates will continue to increase in the foreseeable future.

SF State offers students with financial needs the Perkins and Direct Student loans. While the student borrower is enrolled in school with more than 6 units of courses, the federal government picks up the interest payments on the Perkins loan and many interest subsidized Direct Student loans. When monthly payments start, the Perkins loan interest rate is set at 5 percent. The Direct Student loan is
currently set at 3.37 percent.

Barbara Hubler, SF State’s director of financial aid, says she thinks interest rates will rise dramatically. She suggested that all students who are eligible consolidate their student loan to lock in lower interest rates.

Perry White, vice president of university relations for the Federal Association of Financial Services, a private loan consolidator, received more than 50 SF student loan consolidation applications during the February graduation fair, he said.

His company urges students to take advantage of student loan consolidation before rates rise.
In a press release issued by his company, the association said a student with an outstanding loan balance of $25,000 could expect to pay $7,902 in interest over a 240-month term if their loan is consolidated at an interest rate of 2.875 percent.

Depending on the repayment terms and an interest rate reduction plan, some students can qualify for rates as low as 1.625 percent, decreasing the amount of total interest paid during the 240- month period to $4,030. A 2-percent interest hike will increase the total interest paid to more than $14,500.
Chano Uribe, 32, has $25,000 in student loans, he said. He’s a fine arts graduate student who consolidated his student loans after finishing his undergraduate degree.

Now that Uribe is in graduate school, his loan payments are deferred, but he said they’re stilling looming large. Uribe said he would ideally like to pay off his loans in one lump sum, but until he can do that, he’ll stretch his payments out as far as possible and pay as much extra as he can afford.

While some students fret about paying off their loans, 35-year-old, Art Flagg, a business grad student, doesn’t worry. He’s confident that his knowledge in establishing franchises will bring big bucks, he said.

“Everything I’m doing now is setting me up for the future,” he said.