June Newsletter: Student Loan Repayment | Interest Rate Increase | Scholarships
President Obama Addresses Student Debt
Earlier this week, President Obama issued a Presidential Memorandum expanding the Pay-As-You-Earn Repayment (PAYER) plan to more borrowers in the federal government’s Direct Loan program. Most borrowers who currently use Income-Based Repayment (IBR) will be able to move their loans to PAYER.
Ask the Edvisor: Your Questions, Answered
Q: I’ve heard that the interest rates on Federal education loans will be increasing on July 1, 2014. What will the new rates be? Can I somehow lock in the current lower interest rates?
A: Interest rates on Federal Stafford loans and Federal PLUS loans are fixed rates that change each July 1 based on the last 10-year Treasury rate auction in May. The current rates for the 2013-2014 award year are 3.86% for undergraduate Federal Stafford loans, 5.41% for graduate Federal Stafford loans and 6.41% for Federal Grad PLUS loans and Federal Parent PLUS loans. These interest rates will be increasing on July 1, 2014 by 0.80%. The new rates for the 2014-2015 award year will be 4.66%, 6.21% and 7.21%, respectively.
This corresponds to an increase in the monthly loan payments on a 10-year term of about $4 for every $10,000 borrowed, or about $46 to $49 a year.
Total costs will increase by $460 to $492 over the 10-year repayment term of the loans.
Unfortunately, there’s no way to borrow loans now for the fall based on the current low interest rates. Interest rates are set based on the date the loan is disbursed. Federal education loans cannot be disbursed more than 14 days before the start of the academic year. Also, some colleges are required to delay the disbursement by 30 days for first-time, first-year borrowers. So, unless the academic year starts before July 1 or soon afterward, students are unlikely to be able to borrow early enough to lock in current rates for the fall.
If a current college student has remaining federal loan eligibility for the award year that ends June 30, 2014, he or she could borrow to the limit under the current rates before July 1 and save the money to pay for next year’s college costs. But, most students will have already exhausted their eligibility for Federal Stafford loans for this award year.
The interest rates on federal education loans are likely to continue increasing each year over the next several years by 0.75% to 1.50% per year.
Our goal here at Edvisors is to help you make the best decisions about your college or university education. Part of that is answering your questions about student financial aid. We’ve added a section to our web site that will feature your financial aid questions and Mark’s helpful advice. Submit your question to be included in Ask the Edvisor.
Tips for Comparing Private Student Loans
After scrutinizing your financial aid package, you may find that you have come up a little short on funds. In that case, make sure you know what to look for in a private student loan.
Here are some tips to help you compare your options:
- Look at the Annual Percentage Rate (APR): APR includes associated fees and is a better comparison point than interest rate alone.
- Know your fees and limits: Compare origination and application fees, along with any borrowing limits.
- Learn about fixed and variable rates: Federal student loans currently have fixed rates, but most private loan lenders offer both fixed and variable options.
- Find a cosigner with great credit: More than 90% of approved private loan borrowers applied with a cosigner.
- Compare repayment benefits: Payment plans, deferment options and auto-debit or relationship discounts can be a huge benefit when it’s time to pay back the loan.
The Seven Scholarships
This monthly section of the Financial Aid Newsletter features an intriguing list of seven scholarships that share a common characteristic. We hope this section will make you smile and inspire you to apply for more scholarships.
Seven Late Deadline Scholarships
- BigSun Scholarship
- NextStep Free Tuition Scholarship
- Joe Foss Institute Scholarship Program
- Gen and Kelly Tanabe Scholarship
- American Fire Sprinkler Association Second Chance Scholarship
- Family Travel Forum Teen Travel Writing Scholarship
- Richard G. Zimmerman Journalism Scholarship
Starting this month and all through the summer, ScholarshipPoints.com is giving away a scholarship each week with drawings every Monday, along with the quarterly $10,000 scholarship. To enter, simply log in to your account and spend your points on these drawings before midnight Pacific on the date indicated:
- $1,000 Father’s Day Scholarship (6/15/14)
- ScholarshipPoints $10,000 Scholarship (6/15/14)
- $1,000 Summer Spectacular Scholarship (6/22/14)
- $1,000 National Smile Month Scholarship (6/29/14)
Watch for our notification emails to see if you are a winner!
What is the projected average student debt for 2013 graduates?
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