For two weeks, Tom Gallagher didn't have much success reaching his son and daughter who are working at a camp deep in the Adirondacks.
Cell phone reception is weak. Internet access is limited. Still, the Mitchellville father sent several e-mails reminding them to consolidate federal student loans before higher interest rates kick in Friday.
"I've been pushing both of them to try to do that," said Gallagher, who did the same with $71,000 in parent loans last month. To his relief, his daughter e-mailed this week to say they're taking his advice.
They'll join tens of thousands of borrowers rushing to roll old loans into a new one and lock in the lowest interest rates in the program's 40-year history.
Federal student and parent loans carry a variable rate that is adjusted each July. It is about to jump nearly 2 percentage points, the first rise in five years and largest in more than two decades.
It became clear months ago that rates were headed up. Schools and lenders alerted borrowers; the Department of Education sent out 1.3 million e-mails urging students and graduates to consolidate and switch to a fixed rate before it's too late.
Borrowers got the message.
"It's crazy," said Clark McGhee, executive vice president of Collegiate Funding Services in Fredericksburg, Va. "I've been in the student loan business for 16 years. These last two months is the busiest I've ever seen."
Calls to SunTrust Education Loan are four times higher than usual. "The number of applications that we are generating has tripled," said Kathy Claar, the consolidation business unit manager in Richmond, Va.
"There is an absolute crush of people," said Michael Hernandez, assistant director of loan services for North Texas Higher Education Authority.
The Arlington, Texas, nonprofit is handling 600 calls a day, three times the norm. Hernandez usually doesn't man the phones, but "everyone has to pitch in and help. ... I'm a little hoarse."
To prepare for the onslaught, lenders beefed up staffing, extended hours of operation and are paying a lot of overtime.
Meghan Macina, who works at Academic Financial Services in Tampa, said employees can earn overtime by clocking in an extra 12 to 20 hours a week. There are other incentives, too. Those working the weekend shifts in June can earn a bonus of up to $460, Macina said. And the staffer who writes the most applications will win football tickets to the Tampa Bay Buccaneers. As of last week, Macina was in fourth place.
Some borrowers report the process is a breeze, taking 10 to 20 minutes on the phone or online.
College Loan Corp., a San Diego-based loan provider, boasts that 97 percent of calls are answered by a person within 30 seconds. Calls to College Loan on Monday were answered in about 20 seconds. One employee said staffers are working 12 to 14 hours a day to meet the 30-second goal.
Amanda Graham in Columbus, Ohio, combined five loans totaling $15,000 online about three weeks ago. "It took about 10 minutes. It was easy to do," said the 24-year-old, who graduated two years ago.
"It's like a sigh of relief to know that it was done. I should have done it a month ago," said Elisha DeNeal, a parent in Fredericksburg, Va., who figures she spent three hours on the phone - minus a half-hour dinner break - with her lender.
Through a three-way phone conversation with her Fredericksburg lender and her son in Washington, DeNeal applied to consolidate her $14,000 in parent loans as well as his $33,600 in student loans.
With such high demand, long waits can be a problem. Hernandez said his organization is taking applications from borrowers who couldn't get through to some larger lenders.
To speed up the process, lenders often steer customers to Web sites where they can fill out an application online. But that doesn't solve all the problems.
Marni Tomljanovic, 26, a public affairs consultant in Washington, said filling out an online application was easy; the challenge was getting a person on the phone to answer a question.
"It took time, over a week to get through," she said. "I was calling all the time." She got through after about 20 tries.
But patience pays off.
The new rates, which will be in effect for a year, are based on the last 91-day Treasury bill auction in May. Come Friday, the interest rate on more recent federal Stafford loans will automatically jump from 2.77 percent to 4.7 percent for students in school or those in deferment and grace periods.
The rate for borrowers already repaying student loans will rise from 3.37 percent to 5.3 percent. And for parents with a Parent Loan for Undergraduate Students, or PLUS loan, the rate will jump from 4.17 percent to 6.10 percent.
By consolidating, borrowers get a fixed rate based on a formula. For instance, students in college or recent graduates in a grace period can lock in a rate of 2.875 percent on Stafford loans. Those already in repayment can fix their rate at 3.375 percent.
New graduates with $20,000 in Stafford loans can save nearly $4,700 in interest over 20 years by consolidating now, according to Sallie Mae, a loan provider. Those in repayment would save about $5,100.
Gallagher, who e-mailed his children in the Adirondacks, switched from a 20- to 30-year term when consolidating his parent loans. That cut his $800 monthly payments in half, although he can accelerate payments. "I got a $400 buffer I didn't have," he said.
Other factors are motivating borrowers to act now, too.
In mid-May, the Education Department said students can consolidate loans through private lenders while still in school, an option previously available only to those in the government's direct lending program.
And Congress is weighing proposals to revise the rules on consolidation next year to lower the cost to the government, which subsidizes low-rate loans. One proposal would give borrowers the option of consolidating with a variable or fixed rate, although the latter would be at a somewhat higher rate.
Borrowers can shop around for a lender if their loans come from multiple sources. That's what DeNeal did.
Six months before her son's graduation in spring 2004, DeNeal began getting notices to consolidate. "There must have been two notices in our mailbox every day from different companies," she said. As this July's deadline approached, she looked for a lender offering good service and discounts.
Her son's new rate will start at 3.125 percent - it includes a quarter-point reduction for making payments through automatic withdrawals. Once he logs three years of on-time payments, the rate will be reduced by one percentage point.
Some lenders require applications to be in their hands by June 30; others say the paperwork must be postmarked by that date to meet the deadline.
You would think that with all the long hours lenders would be looking forward to July, when it's no longer possible to get the better rate. Not necessarily.
"It's a little insane right now, but it's a good insanity," said SunTrust's Claar. After June, "that's the tough part. Then we will be dealing with individuals that didn't get the lower interest rate."
Apply soon, and likely online, to meet tomorrow's deadline.
If all loans come from one source, you must consolidate with that lender. Otherwise, shop around for the best service and interest rate discounts.
Borrowers can choose a new loan with a longer term. But the longer you take to pay off a loan, the more you'll pay in interest.