Over the last 10 years the cost of a college education has increasingly become more expensive. More and more families have been forced to borrow money to fulfill the promise of providing a quality education to the next generation of learners. The one silver lining to borrowing these large sums of money, is the historically low federal student loan rates.
As a result of the decisions made by the U.S. Treasury Department, effective July 1, 2017, the cost of borrowing money for college will rise by .70 percent on loans taken out to pay for the 2017-18 academic year. On the surface that increase may not appear to be much, until you do the math. Currently, undergraduate students who take out a new Stafford loan will pay 3.76 percent in interest, the new rate will be 4.45 percent. For example: using the current rate, if a student borrows $10,000, they can expect to pay back a total of $12,014 with interest over the standard 10-year period. However, under the new rates the same loan taken out in the 2017-18 academic year, the student can expect to pay an additional $392 in interest, assuming the loan is paid off in 10 years. For graduate students the rate is increasing from 5.31 to 6 percent and PLUS loans, the loans parent take out on behalf of students, interest rates are increasing from 6.31 to 7 percent. These increases will not effect loans taken out before July 1. Over the next few years, students can expect that interest rates on student loans will continue to rise.
Be careful to keep track of how much money you borrow for college. A key fact each student must remember is, try to limit your student loans to expenses that you really need, i.e., rent and tuition. Whenever possible, take on a part-time job during the semester or save as much as you can from summer employment. The truth is, student loan debt is an obligation that is never going away, so try to limit the amounts you take each year.
When it comes to paying back your student loans, fortunately, students with federal loans have the option of enrolling in an income-driven repayment plans that connects the payments to a percentage of their monthly earnings. So, you can start to pay your student loan, even if your first job out of college doesn't pay that much. Check with your loan servicer to review all your repayment options. Also some borrowers are eligble for loan forgiveness programs. You have to be proactive with your student loans, because they are one of the few debts that never go away.