Students in the United States have racked up a whopping $1.2 trillion in outstanding federal student loans, according to the Consumer Finance Protection Bureau.
The United States Congress sets student loan interest rates, and this year, after passing legislation that would nearly double the interest rate on direct subsidized and direct unsubsidized loans, Congress repealed and set the interest rate for funds borrowed this academic year to 3.86 percent for all undergraduate students.
“The action taken by Congress this summer actually helped to keep interest rates near where they were and helped avoid the precipitous increase we might have otherwise seen,” said John Windham, director of student financial planning.
Congress plans to raise the interest rate each year.
Direct subsidized loans are loans on which the federal government pays interest for a student until six months after graduation.
Unsubsidized loans are the exact opposite, and a borrower begins to accrue compound interest, in addition to the loan amount, unless the student pays the interest off each month.
For all loans taken out from July 1, 2006, until June 30, 2013, interest rates still remain at 6.8 percent.
A timeless predicament in which young graduates frequently find themselves is that they must start making payments on their student loans six months after graduation.
However, some are still unemployed and are desperately searching for jobs.
A premium education from Union University comes with a hefty price tag, and although 84 percent of all undergraduate students receive need-based financial assistance, many students still receive federally funded student loans for an education at Union to be attainable, according to Union’s website.
One way students can begin paying off their student loan debt is by paying the interest accrued by unsubsidized loans while they are still in school.
Obtaining a part-time job, refund checks from the university or using personal savings all are ways to begin paying off student loan debt while still in school.
Being disciplined to do so and pay off as much of the interest as possible will reduce the compound interest that usually drastically and quickly increases the total payoff amount after graduation.
Being intentional about repaying student loans on time is critical to students’ credit history.
“When it comes to repayment, the single best advice I could give anyone is to pay on time — being late on even one payment could negatively impact your ability to consolidate your loans (in the future), and it sets a bad precedent for yourself,” Windham said.
“The discipline of timely payments on loans of any kind will have a very real payoff in terms of your credit history.”
“StudentLoans.gov provides other information regarding flexible repayment plans, calculators and other helpful information to help borrowers understand their options,” Windham said.
