Interest rates on Stafford student loans are doubling today. Don’t panic! Follow this advice instead.
We don’t want to ruin your Monday, but have you heard this news? Interest rates on federally subsidized loans are soaring today to 6.8 percent from 3.4 percent.
Yes, they’re DOUBLING. Why, you wail?
NPR explains—and, basically, it’s the usual culprit: Washington gridlock. “Republicans, Democrats and the Obama administration could not agree on a plan to keep it from happening. Lawmakers say a deal is still possible after the July 4th recess. But if they don’t agree on a plan soon, seven million students expected to take out new Stafford loans could be stuck with a much bigger bill when they start paying the money back,” reports Claudio Sanchez, who also offers all the details on competing plans to fix the issue from both parties.
So there’s hope that lawmakers and the Administration will get their act together—but in the meantime, how should you handle the rise in rates? That depends, of course, on whether you’ve graduated or are still studying.
If You’re Still in School
If you’re still studying, you want to keep your loan burden as low as possible, of course.
Yes, that’s easier said than done, but Eric Greenberg, founder and president of the Greenberg Educational Group, has some suggestions, which he laid out for Brazen in an email:
- Examine which schools are most generous with financial aid and merit-based scholarships. Don’t be afraid to negotiate with the school of your choice based on other offers they’ve received. The “sticker price” for a college is often a lot different from what many students and families pay, and it’s not uncommon for colleges to have some flexibility with tuition. After you receive your financial aid award, if the amount isn’t what you’d hoped for, meet with a financial aid officer at the college (you might bring your parents, too) and further explain the circumstances as sometimes a paper application can’t convey all of the factors.
- Explore vocational training to align with job opportunities. The stigma associated with vocational training has to go, as that’s a practical choice for many students these days.
- Consider whether it’s possible to graduate early.
Brazen, of course, has lots of other advice to help you out, too.
If You’ve Graduated With Debt
First, you might want to contact your elected officials and tell them, politely, exactly how pissed off you are that they’re playing politics with your future. It won’t help your immediate finances, but it might help the country (and make you feel slightly better).
Once that’s done, it’s time to face the facts. If you’re looking for a magic wand answer to the debt you’ve racked up, click on, as it doesn’t exist and this post won’t pretend it does.
There is, however, plenty of good advice out there on how to get a handle on your payments, sort out a budget and get the best deal you can out of the whole mess. The Project on Student Debt is a good place to start. Get Out of Debt Guy has not only a catchy name but also a lot of solid information, including on the different repayment options from the federal government (and when you should take longer to pay, which isn’t “whenever you possibly can.”)
The only bright side of this whole mess among lawmakers might be that it drives you to finally sit down and take a painful but necessary look at your situation. And hopefully, after you do that, lawmakers will just get their act together to reach a compromise, making paying it all back that little bit easier.
Jessica Stillman is a freelance writer based in London. She is an editor at Women 2.0, writes a daily column for Inc.com and has blogged for CBS MoneyWatch and GigaOM, among others.