Students Paying Higher Loan Rates

For recent medical school graduate David Amstel, the opportunity to consolidate $150,000 in student loans and lock in a record-low 2.77 percent interest rate was a no-brainer. So as soon as he graduated in early June, he sent off his paperwork to Citibank and was told his consolidation was complete.

Several weeks later, after the federal government’s July 1 consolidation deadline had come and gone, he opened his mailbox to find a perfunctory note from Citibank stating that the interest rate on his loans had reset to the new federal rate of about 4.7 percent, a jump of almost 2 percentage points.

“When I called, they said my consolidation package was fine, but it was pending,” said Amstel, who attended Downstate College of Medicine in Brooklyn, part of the State University of New York. The phone representative told him that while his loans will eventually reset to the 2.77 percent rate, the bank was so backed up with paperwork that it wasn’t able to complete his request in time. He will have to pay the new higher rate for as long as several months while the bank sifts through stacks of consolidation applications.

He’s not the only one.

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