For undergraduates worried about repaying student loans after their four years at the university, there may be good news on the horizon. Students may be able to decrease the amount of money that they will owe, with the payable interest rate on student loans dropping to an unprecedented 4.06 percent. This decrease makes it a very opportune time to consolidate student loans.
Additionally, the interest rate shift will automatically apply to federal Stafford loans that were given after July 1, 1998. This means that most Washington University graduates or undergraduates close to graduating may have a chance to lock in an interest rate as low as 3.5 percent.
However, students should be very careful when considering loan consolidation, said William Witbrodt, the head of Washington University’s Student Financial Services. He explained that he emphasizes to students the importance of “taking their specific cases to a professional loan servicer.”
There are a variety of financial situations, said Witbrodt, and students and recent graduates must be willing to look at the specifics of their own circumstances. He encourages students to seek out reputable companies, such as Sallie Mae, that have professionals who will be happy to help students figure out the best path to take.
Students such as sophomore Amy Fan admit to needing a bit of help from the professionals, citing a lack of information as a factor.
“I don’t keep up with it as well as I should, and don’t know how the interest shift applies to me,” she said. Fan is not alone; several students were rather hazy on how to dissect their financial situation and confessed to needing some guidance.
Tomer Cohen isn’t worried about repaying his loans after graduation. Although he has both Perkins and Stafford loans, Cohen, a sophomore, is consciously “saving enough money to be able to pay the money back without much difficulty” after his graduation.
“I’m treating [the loans] as a grant for student aid,” said Cohen, also mentioning that they were included in his financial aid package.
In addition to lowering interest rates, there are other ways to augment one’s ability to pay back loans more easily. Witbrodt noted that students who join a volunteer organization after receiving their degrees can extend the due dates on their payments up to as many as 30 years.
Cohen said that he is aware that if he joins the Peace Corps, he can get an extension on his loans.
“I’m very interested in doing Peace Corps or AmeriCorps,” said Cohen, and upon further reflection remarked, “I’d really like to do either.”
The possibility of graduate school also remains in the minds of many students. Brett Beckett, a sophomore with Stafford and Perkins loans, remarked, “If I go to graduate school, I’ll get paid, so it shouldn’t be too difficult to pay back the loans.” Beckett also said that he was confident that a Washington University degree would enable him to quickly find work after graduation to pay back the debt he has incurred.
But for many students, it’s still early. Loan consolidation, while appealing, can only be used by students who have already graduated, and for many that’s a long way away.
Sophomore Ruchir Narayan noted that the current rates may have little to no effect on the rates that will be present when he graduates. Narayan’s Stafford and Perkins loans are subsidized, so that further diminishes the impact that the interest drop has on him, as well as all other students in a similar situation.
Witbrodt also commented that the interest rates in effect today may not stay consistent for students who still have two or three years to graduate, so patience remains a virtue for a large number of undergraduates.
Some loans remain unaffected by the interest reduction. A Perkins loan, for example, generally has a fixed rate around 5 percent and will not be affected by any general interest rate changes.
Still, many are optimistic about the new economic landscape being presented to students.
“The interest rate reduction is a great thing,” said Witbrodt. “Anything that helps finance student education is good.”