Steve Ringo, a financial expert with DeWitt & Dunn, appeared on NBC 5 news with Samantha Chatman to discuss the impact of rising interest rates on the overall cost of financial aid that current students can expect to face. Steve explains the factors you need to consider if you plan on using federal aid to help pay for your college costs.
Each year, the government determines the interest rate on federal student aid. For the 2018-2019 school year, there will be an increase of .59% for all interest rates including PLUS loans, Stafford loans, and graduate/professional assistance loans. The most common of these is the Federal Stafford Loan, which is what most undergraduates take out to help pay for school. This loan in particular will jump from 4.45% to 5.05%.
As Steve explains in the interview, a rate increase this large could result in college costs rising by thousands of dollars over a 10-year repayment period. Students and their parents should do the math to understand how long it will take them to pay off the loans, as well as the expected monthly payment. When determining the total college costs you will be responsible for, tuition is not the only thing to take into account. You must also plan for food, housing, resources like tutoring, and other necessary materials such as textbooks, notebooks, and even computers.
After you add up all your college costs, if you discover it will be more than you had planned for, there are other options to consider. Attending community college for the first two years of school can save you thousands in the long run! Read more and find out how much you could save in this article from Student Loan Hero.
According to the U.S. Department of Education, 11.5% of borrowers who entered repayment between 2013-2014 defaulted on their payments within three years of leaving college. Steve says that when it comes to managing your college costs, planning is key. Student loan debt is unforgivable, which means that even if you declare bankruptcy, you will still be held responsible for paying off your federal student aid. The consequences of falling behind on your payments include the government withholding money from your tax refunds, disability, and even social security benefits.
If you will be attending college for the upcoming school year, these interest rates could affect you. If you plan on using federal student aid to help cover your college costs, make sure you’re prepared for the payments that you’ll be making down the road. Planning is key! If you need help managing these costs or understanding how the federal interest rate affects you, contact DeWitt & Dunn today!