Popular Student Loan Program Changing
May 30th, 2006 - Posted in Education, Student LoanCollege roommates Celeste Steenburgh and Jessica Dreier have different majors but a common concern, mounting student loans.
“I’m already looking for that job that’s going to pay me enough money to be able to pay my bills and pay for my loans,” Steenburgh said.
“I’m very worried about paying it off,” Dreier said.
The average debt for college grads has skyrocketed to $19,000 with many owing more than $40,000 and the numbers of students borrowing is up too.
“It used to be that fewer than half of students took out loans by the time they graduated from college and now it’s two-thirds,” Robert Shireman, of the Project on Student Debt, said.
More than ten million rely on the Stafford loan, backed by the federal government. Its low variable rates make it the most popular way to borrow cash for class.
“Two years ago the interest rates were at 2.7 percent for the Stafford loans, this year they’re at 4.7,” Cheryl Resh, a financial aid expert, said.
But the rules are changing. Starting in July, the Stafford jumps to 6.8 percent. And here’s the biggest difference - it’s going to be a fixed rate.
But the change only applies to new loans. If you already owe money, variable rates will continue, but you should note they’re expected to go up too. So, financial aid experts say consider consolidating now.
“One way that students can protect themselves is to lock in those interest rates,” Shireman said.
“They have the ability to do an in-school consolidation as long as they do it before July 1st,” Resh said.
After that, you can’t! So Celeste now plans to lock in the money she owes at 4.7 percent.
Some banking experts say that the new fixed rate will protect students if interest rates climb. But others feel that the higher payments now will hurt students in the long run.
Source: abclocal.go.com