Student loans look more promising with recent government legislation
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By Morgan Patullo, Staff Writer
When the economy crashed in December 2007 it caused a Great Recession, which affected nearly 40 percent of households. With many Americans jobless or experiencing negative home equity, overdue mortgage payments or foreclosure, students’ abilities to pay for college became of an even higher concern, impacted greatly by any financial struggles of their families.
The College Student Pulse survey conducted by YouGov in 2013 revealed that four out of five college students are currently working while going to school. In another study released by Sallie Mae, a financial services company, it was found that parents now pay for about 27 percent of college costs whereas in 2010 it was a higher 37 percent. Student loans, in accordance, were seen being utilized in increasing amounts over the same period of time.
Recently, a bill was passed in the House of Representatives, which reduces the costs of borrowing for millions of students. This bill set federal student loan interest rates at 3.86 percent for undergraduates, 5.41 percent for graduates, and 6.4 percent for parents. Had this legislation not been passed, the subsidized loan interest rate would have doubled.
Over time, as the economy picks up and it becomes more expensive for the government to borrow money and interest rates overall will increase, which will cause student loan interest rates to increase as well. However, this bill mandates that rates are capped at 8.25 percent for undergraduates, 9.5 percent for graduate students and 10.5 percent for parents; though experts say rates will likely not reach that high in the next 10 years.
As college students, when looking for student loans it is important to note the differences between federal and private loans. Federal loans offer many advantages, such as a delayed repayment period beginning as far as after graduation. Interest rates are fixed and sometimes lower than private loans; students with financial need can qualify for a subsidized loan, and more.
Therefore it is important to visit the benefits of federal loan options before looking for private loans, given these benefits. For more tips on student loans, visit projectonstudentdebt.org.
