07.19.13 | College Costs Out of Control

Posted in Private Student Loans, Student Loans, Uncategorized by Student Loan Network Staff

Today, 20% of adults owe money on student loans, and 57% are worried about repaying these loans. Many have expressed concern about the recent legislation which increased the interest rate of subsidized loans to 6.8%, but the problem is not the cost of student loans. As stated by Mark Kantrowitz in a recent article published by MarketWatch, this will not double loan payments, but rather, will lead to about a 17% increase in monthly payments.

The real problem is the rising cost of college, and decline in government grants. A recent study by Gallup indicates that only 15% of Americans think that it would be reasonable for colleges to charge students more than $20,000 per year. Yet, many schools, such as MIT, Cornell, and Harvard, charge over $50,000 per year, after tuition and living expenses are taken into account. (more…)

07.12.13 | Pros and Cons of Private Student Loan Consolidation

Congratulations on finally finishing college.  While it’s great to be working and living on your own, you now get to pay your own bills (and yes, now you finally understand why your parents always yelled at you for taking more than 10 minutes in the shower).  Amongst these bills, the most pressing may be those student loan repayment letters that start to arrive all too soon after graduation.  With student loan debt averaging out to $23,000 per borrower, you could end up paying $200 per month for the next 15 years!

Fortunately, there is an alternative: college loan consolidation. Student loan consolidation enables you to lower your monthly payments and pay back your loan over a longer period of time. To give you a better idea, let’s explore the pros and cons of consolidating your student loans. (more…)

07.01.13 | 3 Things You Should Know About the Stafford Loan Interest Rate Increase

Posted in News, Stafford Loan, Student Loans by Student Loan Network Staff

As you may have heard, the interest rate on subsidized Stafford loans just increased from 3.4% to 6.8%, effective July 1, 2013. Congress wanted to keep rates down, but the deadline hit before all parties could agree on a course of action. Here’s what you need to know about these changes.

1. It only affects new loans

I’ve received a lot of questions lately about the impact of this rate increase. It seems like graduates everywhere are concerned that their student loan payments will soon be skyrocketing. The good news is, it’s not retroactive — meaning it won’t affect any subsidized loans originated before July 1, 2013. So for borrowers who are currently repaying older loans, don’t worry, you’re in the clear.

However, the new rate will impact loans originated after July 1, 2013. This means any new subsidized loans will have the 6.8% rate. Despite this rate hike, subsidized loans are still a better deal for borrowers because the interest subsidy remains intact.
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06.26.13 | Will Student Loan Interest Rates Double on July 1?

Posted in Financial Aid, News, Stafford Loan by Mark Kantrowitz

If Congress does not act, interest rates on new subsidized Stafford loans will double from 3.4% to 6.8% on July 1, 2013. Previously originated subsidized Stafford loans and all other education loans will not be affected.

Doubling of the interest rates certainly sounds dramatic, but the actual impact on students will be more muted.

Each year, less than a third of undergraduate students receive federal subsidized Stafford loans. The average subsidized Stafford loan is $3,357, based on data from the 2007-08 National Postsecondary Student Aid Study (NPSAS), with average subsidized Stafford loan debt at graduation of $9,008 ($11,329 for Bachelor’s degree recipients). Only 3% of subsidized Stafford loan borrowers graduate with debt equal to the aggregate limit of $23,000.

Assuming a 10-year repayment term, doubling of the interest rate on $3,357 in debt increases the monthly loan payment by less than $7. On $9,008 in debt, the increase is less than $18; on $11,329 the increase is less than $24; and on $23,000 the increase is less than $48.

Doubling the interest rate does not double the monthly payment. Most of the monthly payment goes to principal, not interest. For example, on a 10-year term, increasing the interest rate from 3.4% to 6.8% increases the monthly payment by about one sixth (16.9%).

So while the interest rate increase will increase borrowing costs, it is not a major disaster.

Focusing on the interest rates, on the other hand, is a distraction from the real problem (more…)

06.14.13 | 5 Solutions to the Subsidized Student Loan Debate

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Over the past month, you may have heard about the impending subsidized student loan interest rate increase, as politicians frantically work to come to a consensus before July 1. Right now, subsidized student loans interest rates currently stand at 3.4%, but will increase to 6.8% unless a new bill is passed by July 1.

With this decision having a major impact on your future, it is important to stay up to date with the issue and the suggested solutions.

1. Default Solution: Increase to 6.8%

As stated above, if politicians fail to come to an agreement, the interest rate for subsidized loans will increase to 6.8%.

2. Democratic Solution: Student Loan Affordability Act

Most Democrats in the House of Representatives argued for a two-year extension on the 3.4% interest rate, which would maintain the current interest rate and bring the question to Congress again in two years. However, this bill was rejected in the Senate on earlier this month.

3. Senator Elizabeth Warren’s Solution: Student Loan Fairness Act

Senator Warren proposed a bill which would dramatically cut the interest rate on subsidized loans. Citing the fact that the student loan debt now exceeds $1 trillion, Warren proposed cutting the interest rate to 0.75%, which is the same rate that banks are able to get from the government. For more information, please see our recent article on the details of Warren’s bill.
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06.11.13 | Impacts of the Potential Stafford Loan Rate Increase

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Student Loans in the MediaWith the recent legislation involving the subsidized student loan interest rate, many have begun to express concern towards the fact that if Congress is not able to reach an agreement by July 1, subsidized Stafford loan interest rates will automatically increase from 3.4% to 6.8%.  In the process, many news sources have erroneously been reporting that this increased interest rate would yield an additional $1,000 in annual debt for the average borrower. However, this figure is much lower in reality.

Using the loan repayment calculator from Finaid.org, we can begin to calculate more-accurate rates (though still estimates). Assuming a student borrows $23,000 over the course of four years—the maximum amount that can be taken out for undergraduate studies—the annual increase will be less than half of what has been reported.
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05.29.13 | Happy 529 Plan Day!

Posted in Financial Aid, financial aid tips, News by Student Loan Network Staff

Welcome back readers!  In honor of 529 Plan day (5/29/13), I’m here to help you learn about 529 plans and hopefully help you win some money for college.

What is a 529 Plan?

To start off, what is a 529 plan?  In short, a 529 plan is a savings plan with tax advantages that helps students pay for college.  529 plans can be further broken down into 2 types of college savings plans: prepaid tuition plans and college savings plans.

Prepaid Tuition Plan:

You know how your grandparents always talk about how they could buy a candy bar for 5 cents when they were kids?  Today, that same candy bar costs $1.00.  Over time, prices rise, and prepaid tuition plans enable you to pay the price of college at the time that you start your plan.  Prepaid tuition plans allow you to lock in the current tuition rate for your future educational expenses, and are not subject to federal, and sometimes state, taxes.  However, prepaid tuition plans require the student to attend one of the eligible public colleges or universities from the state of the tuition plan, and place a very tight restriction on how you can spend the money from the plan.  In addition, prepaid tuition plans are counted as a parental asset on your FAFSA application when determining your Expected Family Contribution, thus potentially lowering the amount of federal aid for which you may qualify.
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05.23.13 | Smarter Solutions for Students Act

Posted in Financial Aid, financial aid tips, News, Stafford Loan, Student Loans by Student Loan Network Staff

As you may recall, last year, Congress voted on whether to raise the subsidized Stafford loan interest rate to 6.8%, or keep it at 3.4%.  Congress decided to prolong the decision for another year and keep the subsidized interest rate at 3.4%.  However, a year has gone by, and it is once again time for Congress to vote.  If Congress fails to come to a consensus by July 1, the interest rate on subsidized loans will automatically double to 6.8%.

In response to this impending decision, several politicians have put forth ideas of what they deem to be the best solution.  On May 1, Senator Elizabeth Warren proposed the Bank on Students Loan Fairness Act, which sought to lower the interest rate on subsidized loans to just under 1%, which she described as the equivalent rate for which banks qualify.
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05.22.13 | A Student’s Guide to Writing a Resume

Posted in Post College by Student Loan Network Staff

ResumeIn today’s economy, students need to submit their resumes to employers early to land a job after graduation. Resume and application forms provide employers with written evidence of a prospective employees’ qualifications and skills. Generally, a resume contains all of the information acquired on an application form, except that it usually fits onto one page with various templates. Some employers prefer a resume over an application form while others require an applicant to fill out both. Not every job requires a resume; therefore, inquire with the employer about their requirements before submitting anything. A resume represents the applicant, which means it should be presented in the utmost fashion.

Follow the basic guide below to gain a clearer perspective on how to write an effective resume to prospective employers.
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05.16.13 | Elizabeth Warren Calls for Student Loan Changes

Posted in Financial Aid, News, Stafford Loan, Student Loans by Student Loan Network Staff

Last year at this time, the big issue in the news was the impending doubling of student loan interest rates. The interest rates of Subsidized Stafford Loans were set to double from 3.4% to 6.8%. Before this could happen, Congress stepped in, temporarily lowering them for another full year.

That extra year of low rates is now coming to a close, and rates are once again set to double. This is why Senator Elizabeth Warren has introduced the Bank on Students Loan Fairness Act. This act would allow students to borrow at the same rate as banks, which is about “one-ninth the amount that students are asked to pay”.

Here is a quick list of what this bill seeks to do:

  • The bill would charge students a rate equal to the rates banks are getting from the government (for subsidized loans only)—a rate of less than 1%.
  • Loans would be funded through the federal reserve, with administration by the Department of Education

Senator Warren gives an excellent overview in her introduction of the bill to the Senate Committee. Watch it below.