Interest Rates on Student Loan Debt

Effective July 1, federal student loans issued will have higher interest rates. Federal undergraduate subsidized and unsubsidized direct loan interest rates increased from 3.73% to 4.99%. Interest rates for unsubsidized Federal Graduate and Professional Loans and Direct Plus Loans have also increased. It’s important to remember that in the spring of 2020, the Federal Reserve cut interest rates on student loans. As the economy recovers, the Federal Reserve has raised interest rates.

Our national student loan debt has soared to over $1.7 trillion. Student loans are not just a problem for young people. It’s also a growing concern for older Americans. Fifteen years ago, borrowers aged 50 and over accounted for $47 billion of the country’s student loan debt. Last year, that figure had risen to $289.5 billion. Not only are older borrowers racking up student loan debt by taking out loans for their children and grandchildren, but they are going back to school to earn a degree that would help them maintain and grow their careers. For more information on how to navigate retirement student loans, follow Great Waters Financial on Facebook and LinkedIn.

If you fill out the Free Application for Federal Student Aid, or FAFSA, there’s not much you can do to lower current interest rates. However, if you are considering using a private lender for student loans, consider applying with a co-signer. Ideally, someone with a good credit history. Their good credit can help increase your creditworthiness and hopefully earn you a lower interest rate. If you are in the repayment phase of your loans, consider refinancing if you are able to obtain a lower rate than when you took out the loan. If you refinance, it’s important to note that you lose benefits like coronavirus forbearance and income-based repayment plans.

Some advice Barry Bigelow has for borrowers is to start paying now. If you are financially able to repay your student loans, start paying now. By making your payments now, not only are you working to pay off student loans, but your payments go to principal, not interest. Making payments on principal not only reduces your balance faster, but it can also help reduce the amount of interest that will accrue, ultimately saving you money.

Although we have seen several delays, expect no more delays in student loan repayments. Start adjusting your budget now. Review spending as you repay your loans. Figure out what consumed your extra money and look for ways to reduce your budget. If you can’t find room in your spending plan to make your student loan repayments when the freeze lifts, start looking at your repayment options. It may be possible to switch to income-based payments which could reduce your monthly payment based on your income. Student borrowers are ready to work with you. All you have to do is find the repayment plan that’s right for you.

With more and more offices switching to fully remote or hybrid working options, people need to look at their income and expenses and see how working from home has impacted their wallet. Did you save money on gas, lunches, clothes, and cafe tours? How can you reprioritize that money in your budget and allocate it to paying off your student loan? If you are able to deduct home office or work-from-home expenses, you may qualify for a larger tax refund. Consider using this windfall as an opportunity to invest more money in your student loan balance.

Comments are closed.