While those with student loans might be hoping that Congress gets together and keeps rates from doubling from 3.4 percent to 6.8 percent on federally subsidized Stafford Loans, there's no guarantee of this happening. While a recent CNN Money article notes that "Lawmakers are working hard behind the scenes trying to strike a deal to save the 7 million college students who are slated to take the subsidized federal Stafford loans this year." However, even if the government can't get its act together, this doesn't mean that all is lost for students looking to combat rising loan rates. There were certain steps that I took as a student back when rates were closer to 7 percent that helped me avoid some of the strain that can be felt when paying back such debt.
Finding ways to reduce financial assistance
It's easy as a fresh-faced college student to be caught up in all the financial aid talk. You hear so much about it that it almost seems normal to undertake a heavy debt load to finance an education. But sucking up as much debt as you can may lead to repayment issues down the road and could actually lead to a bit of complacency when it comes to actually earning money for school.
I utilized my savings from high school work to pay for my portion of my first year of college, supplemented with a few thousand dollars in student loans. I did the same thing sophomore year, which is also the year I began in a work-study role until the end of college. This allowed me to pay for most of my school cost obligations without undertaking more student loans.
Meanwhile, though I didn't immediately pay back any extra student loan money I received, I did put it in the bank to earn interest for me. Since my loans were deferred until graduation, I could earn interest on this money for several years before having to pay it back.
Paying back loans faster
I began paying back my student loans in greater amounts than necessary as soon as my first payment arrived. In fact, I think I paid less than $100 total in interest on my nearly $7,000 in loans over the course of my repayment process, which lasted less than a year. I think that many students stick to a payment plan because it's standard and easy, but paying off loans quicker can reduce the amount of interest due on such loans significantly.
Taking on a personal loan
While it might not be available for everyone, taking on a personal loan at a low or no interest rate could be a great help in hurrying the student loan payback process along. This is what I did after graduating.
While my mother wanted to gift me money as a graduation present, I instead ask her for a no-interest loan. In this way, I was able to put a big chunk of money (about $5,000) toward my loans all at once. Then I was not only able to avoid accumulating additional interest on my loans, but make $500 monthly payments back to my mother interest free, having her paid off in full by the end of the year.
So when the outlook for student loan interest rates looks bleak, just remember that there are options. And while those options might still include taking on loans in some amount, being able to minimize the size and effects of these loans can make life after college just a little bit easier.
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The author is not a licensed financial or educational professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
- Personal Finance - Career & Education
- Investing Education
- student loans