So what does double student loan interest mean to me?

Anyone listening to the news or reading print media knows that student loan interest rates are set to double from 3.4% to 6.8% on July 1, 2013. The actual impact of that increase is less widely known.

For students who borrow the average amount of $23,000 and repay their loan over the standard 10 year repayment period, the impact is $4,598.98 in additional interest. That figure uses a repayment model in which the student pays his monthly loan interest that accrues while he is in school.

Student loan interest rates have been at 6.8% before (2006-2008). Regardless of the interest rate, there are 3 steps families can take to minimize the impact of student indebtedness at graduation:

Pay the interest and loan fees while in college each year. Students who work full time over the summer can save enough money to be able to do this. Put the money in a separate account and pay the interest via automatic bank drafts each month.
Plan to live a very limited lifestyle right out of college so that you pay off your loans early.
Plan to make extra loan payments and save big on the cost of your loan and shorten the time you are in repayment. Optimally, a student could plan to live at home for 24 months after college graduation and work full time to pay his student loan in full. If that is not possible, consider paying an additional $100.00 a month to reduce 3.4 years of the 10-year repayment term and save $1,470.49 in interest over the life of the loan.

For more information about student loans, look at the student loan calculator at www.finaid.org.

14 Comments to So what does double student loan interest mean to me?:

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Pam Rambo on Friday, August 30, 2013 1:29 AM

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Industrial Real Estate Loan on Tuesday, December 24, 2013 12:12 PM

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