Saving a Buck: Student loan interest rates double
WASHINGTON — July 1st, 2013, was a critical day for student loan rates. The rate on government subsidized loans doubled from 3.4 percent to 6.8 percent. The jump will specifically impact those taking out loans for the 2013-2014 school year.
It’s a change that could end up costing students a lot over the life of their loan but it is manageable.
Luke Provenzano, an Oklahoma college student, said, “In the early years of college you aren’t thinking that far into the future. In college, you just live in the now.”
A lifestyle that may be fun, but at some point college students. like Luke, are hit with the reality of just how much college costs. While he has a job and pays for some of his school the majority of his education is funded by student loans.
Luke said, “It’s very difficult when you have all these things to pay for.”
Tracy Ann Miller, with Red River Advisers, said, “I think it’s important to borrow as little as you can by subsidizing it with part time jobs. That way it makes your debt less.”
Financial experts say working to help fund college is a good move, especially now that the interest rate for subsidized loans is doubling to 6.8-percent.
Miller said, “The difference in rate will be about $4,600 in cost. That’s a huge difference.”
Luke said, “That’s a lot of money. That’s a car.”
Miller says while student loans aren’t bad they can really put a person in a bind.
She said, “Student loan debt is always there. You can’t forgive it in bankruptcy. It keeps accruing and getting bigger.”
She says the average student graduates with about $35,000 in loans. She says many of them have no idea how to manage the debt.
Miller said, “They learn how to program cell phones and work on computers they can learn how to manage a check book and budget.”
Miller says college students need to be taught early on how to manage money whether it’s loan money, money they earned, or cash from mom and dad.
“Even if you are subsidizing their housing make them sit down and write the check to pay the rent,” Tracy Ann Miller says.
She says just writing that check will help them to understand the cost. The main key to saving, despite the higher interest, is to avoid taking maxing out the loans. Instead just take what you need to cover the cost of school. It’s a lesson Luke has learned.
He does what he can to pay some of his school out of pocket and hopes to get rid of the debt as soon as possible.
Experts say there is a chance the rate could drop; however, that will only happen if the government intervenes. So far Congress has not been able to agree on the issue which is why the rate increase went into effect on July 1st.