CHARLOTTE — Watch out if you’re heading off to college this fall -- federal student loan rates just went up about a full percentage point. That may not sound like a lot but it can add up to thousands over the life of a loan.
Below, Action 9′s Jason Stoogenke explains how much you’ll pay, and what everyone else with student debt still needs to know.
HOW MUCH DID FEDERAL STUDENT LOAN RATES GO UP?
Rates rose from 2.75% to 3.73% for undergrads and from 5.3% to 6.28% for Direct PLUS loans, which are for grad students and parents.
IS 1% REALLY A LOT?
Student loan interest rates have been really low. So, historically-speaking, this isn’t as jarring, but 1% can add up over the life of a loan.
HOW MUCH IS 1%, REALLY?
According to the federal student aid website, the most an undergrad can borrow each year is $12,500. So if four years of school costs $50,000 -- let’s say you have 10 years to pay that back. If it’s 1% higher, you’re talking $4,000 more total (or roughly $30-some more per month).
HOW CAN YOU OFFSET THAT?
Mark Henry with Alloy Wealth in Ballantyne says to calculate the entire cost of college up front, not just tuition and living expenses. Remember books, fees, transportation, etc. He says you may even want to think about community college for a year or two to knock out your core classes for less money.
“You have to really come into this with eyes wide open and ‘Can we do this, how much debt am I going to take, and how do I repay the debt?’ Because you don’t want to make the problem worse, get out of school, finally get that first job and stuff, and you’re saddled with so much debt you can’t even enjoy what you worked so hard for,” he told Action 9′s Jason Stoogenke.
YOU SAID FEDERAL, RIGHT?
Yes. None of this applies to private student loans.
WHAT IF I ALREADY HAVE A LOAN?
This only applies to new borrowers. If you already have a loan with a certain interest rate, don’t worry, this doesn’t change that.
SPEAKING OF ALREADY HAVING A LOAN, WHAT IF I TOOK ADVANTAGE OF THE PANDEMIC FORBEARANCE?
The government said you could put off paying back your student loans without any penalty until Sept. 30.
(WATCH BELOW: How the stimulus package affects federal student loans)
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