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It was a mad dash to the finish last week, as law students and recent law school graduates scrambled to submit applications to consolidate federal loans before an interest rate hike went into effect on July 1. Financial aid counselors said the deadline could not have come at a worse time, with most students swamped with final exams. “The timing could not be better to get fewer people to do it,” said Charles Preutt, director of financial aid at Georgetown University Law Center. Preutt said the office had reached about two-thirds of its students two days before the deadline, and was still hoping to get through to the stragglers. The increase affected federal Stafford loans, which increased by two percentage points, from 2.7 to 4.7. Those who consolidated their federal loans before the deadline locked in the lower rate. But those who didn’t are not at a total loss, say financial counselors. “The basic reason consolidation exists is not just to lock in a rate-that’s just a current feature,” said Jeff Hanson, director of borrower education services at Access Group, a nonprofit adviser. “The real logic behind consolidation is to give those who are struggling to make monthly payments more time to pay off their loans.” Loss of grace period Anybody with eligible federal loans can consolidate, whether they are still in school, recently graduated or already in repayment. The benefit to consolidation is that the borrower can lock in a low rate and reduce his or her monthly payment. The drawback for students, however, is that the loan goes into repayment immediately, so they lose their grace period. But advisors say they can get a deferment in lieu of the grace period. For working lawyers who have already consolidated loans, like Seth Goldman, an associate in the Los Angeles office of New York’s Skadden, Arps, Slate, Meagher & Flom, the annual flux has no real impact. “I consolidated what I could back in 2002,” he said. Goldman can’t consolidate again unless he takes out new loans. But those who haven’t consolidated need to pay attention since rates change annually in July. “4.7% is still a good rate,” said Hanson, who added that it is still lower than most mortgage rates. But who knows what next July will bring?

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