If you're looking to borrow money for any reason, the interest rate for which you're eligible is very important. Most people don't understand how a few percentage points can really add up and so they usually ignore it, instead concentrating on the monthly payment alone. But for someone attending college or for parents with children in school, current student loan rates are incredibly important. Let's take a look at some numbers so that you can understand this a bit better.
How Loan Interest Adds Up
Suppose your student loan rates are at 8.5% and you've borrowed $10,000. If you pay $150 per month you will need 91 months to pay off that debt and you wind up paying over $3,600 in interest charges alone.
Now let's take that same $10,000 but we'll use student loan rates of only 7.0%. If you pay that same $150 per month you will need 85 months to pay off that loan and will have paid only $2,750 in interest charges. That's almost $1,000 in interest payments you've saved just by having student loan rates of 7.0% rather than 8.5%, only a 1.5% difference!
Student Loan Rates Can Afford
This is just a simplistic example of how better student loan rates can affect the amount you pay overall and how much money you can save but if you do the math with all loans available, you might be surprised at what you find. Some have wound up paying literally thousands of dollars more in interest charges alone because they haven't bothered to shop around for the best interest rates or ignore rates in favor of a lower monthly payment.
Federal Government Loans
Typically the federal government offers the best student loan rates for students and parents. They have many loan programs available, from subsidized and unsubsidized Stafford Loans and PLUS Loans to many other options as well.
Offer Grants for Some Students
They also offer grants to some students depending on where they study and what they're studying as well. Because the federal government isn't really supposed to be making a profit from things like loans, they are able to offer better student loan rates than most private institutions.
Federal Government and Sudent Loan
Some people have serious misconceptions about borrowing money from the federal government when it comes to student loans and may assume that they can't have money in the bank or own a home to be eligible but these things just aren't accurate. It's true that subsidized student loans are only for those in a particular financial standing, but there are many federal loans available that virtually guarantee an education for everyone.
Pay Attention to Loan Rates
Paying attention to your student loan rate is vitally important when talking about your financial health overall. No one likes to be saddled with debt but realizing how much you're paying in interest charges and fees alone can be even more depressing. So rather than think only about the monthly payment be sure to do the math when it comes to available student loan rates. You might be surprised at how a small difference in percentages points can make a huge difference in money paid overall.
More Student Finance Advice
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Insider Secrets to Student Scholarships, Loans and GrantsDo you have your questions and fears of funding your college education? Have you ever wondered if there was a place you could find all the information that would help you get the right aid? This guide gives you all the answers. |
