07.11.06 | Federal Student Loan Rates Rise
As many of you probably know, interest rates for federal student loans rose dramatically July 1st. Rates in recent years have been at historic lows, lulling many into a false sense of security.
Those of us who graduated 3-5 years ago were in a lucky situation where we were earning a higher interest rate on our savings accounts than they were paying on their student loans. It made no sense to pay the loans off early.
That’s all changed.
If you’re a current student or recent graduate, you’ll know that the rates have shot up over the past few years, bringing the current in-school Stafford loan rate to 6.54% and the repayment rate to 7.14% on July 1st of this year. That means, in addition to the higher tuition prices, students have to pay more back in interest as well.
That’s why it’s so important to plan financially for after graduation. Start now, before you graduate or go into repayment and the whole process will be much easier. Visit July’s edition of the Financial Aid Newsletter – about half way down is a Featured Article: The One Page Budget that is a great guide to get you started. If you get your finances in order now, life will be alot easier once you reach repayment.
Also, plan on applying for consolidation as soon as you graduate. Due to recent changes by the Department of Education, it is much more difficult for students still in school to consolidate with the company of their choice, but once you’ve graduated you have many more options. Don’t wait for consolidation – apply right after graduation. The fiscal year begins July 1, which means if there’s a rate increase again next year, you want to get your application in well before July 1, 2007. As the rates have gone up annually the past few years and with the current national debt, don’t be surprised if the rates go up again next year.
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