A well-paying job goes a long way toward helping you gain financial fitness, and achieving at many professions requires a college degree. Ironically, the student loans many take out to finance an education are burying them in debt. Currently, there is $1 trillion in student debt outstanding in the United States and with the increasing cost of college this figure is likely to rise.
Stafford Loan interest rates
Recently, the cost of new student loans got even steeper when Stafford Loan interest rates doubled from 3.4 percent interest, which it's been for the last two years, to 6.8 percent interest, meaning thousands of dollars in additional money owed by graduates for the same amount of money borrowed.
The student loan interest rates rose on July 1st because, despite debating the issue for months, lawmakers failed to reach an agreement on the subject before the rates were set to rise. This means that if you recently got a Stafford loan, you currently owe the higher interest rate.
New legislation will be considered
Fortunately, a new bipartisan bill is under negotiation that would retroactively lower the interest rates. The proposal, which is set to be voted on soon, would tie rates for undergraduate Stafford loans to the 10-year Treasury note plus 1.8 percent. This would feature an annual interest rate cap of 8.25 percent and mean that current undergraduate loans would drop to 3.61 percent. Graduate loans would pay the 10-year Treasury rate plus 3.6 percent, capping at 9.5 percent. And parent loans would feature 4.6 percent plus the 10-year Treasury rate and cap at 10.5 percent.
While the news is potentially positive regarding the retroactive lowering of interest rates, they may rise as soon as two years. It's also important to remember that, for the most part, you can't escape repaying student loans, not even by filing bankruptcy.
In order to avoid a student loan debt load that may cloud your financial future and require that you seek debt help, understand exactly how much you're going to owe before you take out a student loan, and only borrow the bare minimum of what you need.
About the Author:
Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies' Home Journal, Parenting, Entrepreneur and The Los Angeles Times.
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