It’s graduation week for many students at Chicago area colleges.
And for those with student loans, the clock starts ticking the day after the diploma is handed over.
Nearly half of all college students will graduate with at least $10,000 in debt — and a quarter are carrying at least $25,000 in student loans. With interest rates rising, paying back these loans could get a whole lot more expensive — unless make your move now.
For graduating seniors, the end of classes means the beginning of a whole new life — and the start of the 6-month grace period for repaying a mountain of student loans.”
“During the grace period, I plan to budget my salary and budget my living expenses and try to save up, and just start paying off some of my loans,” says Carol Lau, recent graduate.
Nearly half of all students will be paying down loans of at least $10,000. And that monthly payment could be going up. As of July 1st, student loan interest rates are expected to rise nearly 2 percent.
Student loan rates which are tied to the 91-day treasury bills will jump to 5.3 percent for those already repaying Stafford loans; 4.7 percent for students in school or in the 6-month grace period after graduation and 6.1 percent for plus loans parents take out.
The good news is that recent grads and current students can consolidate their loans at today’s historic low interest rates. The interest rate would then be fixed throughout the term of the loan, saving thousands of dollars. The bad news is that you’ll lose the 6-month grace period during which your monthly payments are on hold.
“I think it’s very hard for college students to adjust to paying off loans as well as starting a new chapter in their lives,” Lau says.
But the long-term savings could be worth it. And if you can’t find a job, and can’t make the payments, you may still be able to ask your lender for a hardship deferment.
How else can you save on your payments?
Many student loan lenders will drop your interest rate further if you make your payments on time. And choose to pay your student loan bill electronically — your rate will drop another quarter of a percent.
“This allows the lender or the servicer to directly debit that monthly payment from the students account,” says Michael Burke, American Educational Services.
Which will help you to put more money in your pocket.
Published: Jun 9, 2005