Federal student loan interest rates will rise July 1 and consequently, many students and alumni are scrambling to consolidate their loans.

The move comes as a result of the Deficit Reduction Act signed by President Bush in February.

Loan holders will observe an increase from 4.75 percent to 6.54 percent. Parents with PLUS loans will experience almost a two point percent increase from 6.1 percent to 7.94 percent.

Consolidation allows loan holders the opportunity to “lock in” current interest rates on all of their federal student loans before the government raises them. Many graduates use consolidation as a way to lower their monthly payments by extending the term of their loan from 10 years to up to 30 years.

Ultimately, borrowers extending their loan term may pay much more in interest.

An example would be if a student pays off their loan over 10 years at the higher interest rate, as opposed to a student who pays off their loan over 30 years at the reduced interest rate. Ultimately, the 30-year loan schedule will accumulate more interest, even though the interest rate is less.

Those who wish to consolidate their loans solely to lock in the current lower rate are advised to read the fine print to ensure the term of their loan is the same.

The Deficit Reduction Act also contains a provision that no longer allows students to place their loans in repayment early in order to consolidate their loans and lock them in at the lower repayment rate.

Students then would avoid immediate repayment by getting an in-school deferment.

Jennifer Meier of Sycamore has been trying to consolidate her student loans and has met many obstacles.

“It is very difficult to do if you do not do it during your grace period,” Meier said.

Currently, the Western Illinois graduate has five federal loans at 5.5 percent but if she does not consolidate, the rate will increase to 6.8 percent July 1. This could cost her hundreds of dollars due to increased interest payments.

“This has been the most confusing and frustrating process ever,” Meier said despite her expertise working in the financial industry.

Meier is not very confident she can get her consolidation done despite the several e-mails and calls she has made.

As the deadline approaches, Meier described the situation as nerve-racking.