Tips to consider when costs are rising for student loans

Federal interest rates have risen two times over the past several months and for any students borrowing federal student loans to head to a college or university
Published: Aug. 4, 2022 at 4:28 PM EDT
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SAGINAW, Mich. (WNEM) - Federal interest rates have risen two times over the past several months and for any students borrowing federal student loans to head to a college or university need to be prepared to pay back more.

If you’re getting a federal loan to help pay for college expenses, it’s going to cost you more to pay it back.

Vicki beam, owner of Michigan College Planning in Traverse City, says college students who fill out a free application for federal student aid, FAFSA, are eligible for federal direct loans.

Students who are freshmen can receive $5,500, sophomores can get $6,500, and juniors and seniors can receive $7,500.

The interest rate for federal money borrowed sits at 4.99 percent up from 2.75 percent two years ago, Beam said.

“Obviously with interest rates going up, interest rates went up on the student loans as well.” Beam said. “If you were at a 2.75 percent compared to a 4.99 percent, you’ve almost doubled what you are paying a couple of years ago, and that means it could take longer for some college students to settle their debt after they leave school.”

Beam cautions students to borrow wisely, wanting them to think about what kind of salary they’ll have after college.

Beam is quick to point out that there are ways to lighten the load of debt in college. Saying high school students with college aspirations should get good grades that can lead to debt free scholarship money.

Here are some tips to help students lighten the load when paying back student loans.

“You’re talking about probably about a hundred dollars or so a year on that $5500. And that adds up over the course of the ten, twenty years that you’re paying on it,” Beam said. “There are great opportunities in high school, dual enrollment, ap courses, that will help you graduate with college credits. You know looking at a community college for the first year or two to drastically cut the cost of college. So, there are a lot of things that we work with families to help make college more affordable.”