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Why Student loan interests are going up and how to cope.

Federal subsidized student loans going up, Tied to 10-year Treasury rate, Ways to minimize costs.

In the last several years, many students were able to get Federal subsidized student loans with lower interests and this helped them pay their loans faster with less interest accumulated.

However, student loan interest rates are going to double in the near future from about 3.4% to 6.8% and this will increase the rates the students have to pay when paying back their loans after graduation.

New laws have been passed to tie Student loan interest rates to 10-year Treasury Bond Rates and this will mean that the student loan rates will continue to increase over the years.

However, this is not as bad as it sounds for the students. If one borrows the maximum allowed Federal Subsidized loan of $5,500 per year, they can repay it over a period of 10 years with an interest rate of 6.8% and that will make their total payment to about $7,600 which is just about $950 more than they would pay at an interest rate of 3.8%.

Given this is spread out over a period of 10 years, it is not a bad thing at all. Students can also minimize their student loans by applying for Financial Aid, Scholarships and just borrowing what they need to cover their college costs.

A rule of thumb is to not borrow more than your expected one year salary when you complete college. So if after graduation you expect to make $30,000 a year, you should try to borrow less than $30,000 in student loans.


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