PANAMA CITY — Students scurrying around college campuses this week means the fall semester is in full swing, right along with the necessary evil of weighing options to repay federal student loans.
“There really is no wrong or right. Financial aid does not need to be difficult,” said Kathryn Morgan, financial aid representative at Florida State University Panama City.
Federal student loans can by mind-boggling. Though loan rates are clearly stated online, it takes students extra legwork to project what future repayment will look like in terms of knowing exactly how much interest will add to the final loan amount and how long payments will follow the borrower around.
News trickled out in the spring that federal student loans rates increased by just under 1 percent across the board as of July 1. According to the Federal Student Aid website, undergrads went from paying 3.86 to 4.66 percent on subsidized and unsubsidized loans. Graduate and professional unsubsidized student loan rates inched upward from 5.41 to 6.21 percent. Parents and grad students borrowing on Direct PLUS loans saw an increase from 6.41 to 7.21 percent.
For some, news of rising loan rates may be offset by reports in June that President Barack Obama signed measures to provide a little relief to students in debt. According to The White House Blog, the memorandum will cap student loan payments at 10 percent of the student’s disposable income, instead of the previous 15 percent. The plan also grants forgiveness to loan balances that remain after 20 years of repayment rather than the earlier 25-year cap.
“You have to take ownership of your education,” Morgan said, adding students can learn a lot in a few minutes of research.
Online calculators are available to help students try on different scenarios for loan repayment. A simple Google search can be enlightening to put loan terms in perspective.
Remember this
Morgan said college-bound students can increase their chances of securing grants and scholarships, or at least increase their understanding of loans, if they remember some key strategies.
“Do a FAFSA every January and adjust it after tax time in the fall of that year,” Morgan said.
Students miss application deadlines for federal money and put themselves lower on the list for funds by filing the Free Application for Federal Student Aid (FAFSA) too late in the year.
Morgan said high schoolers and their parents should file the FAFSA during students’ junior year. It makes students eligible for early scholarships and others offered at different times of the year.
“You want to maximize your search for scholarship opportunities before getting student loans,” Morgan said.
Morgan said loans should generally be a last resort, but there is nothing wrong with utilizing them. When anxiety creeps into decision making, her advice is simple.
“Do not take more than you need,” Morgan said. “If student loans are the only way for you to get higher education, look at yourself in the mirror and ask yourself who you’re investing in.”
She also said students who’ve graduated or know for certain they won’t take out more loans should look into consolidating all student loans at a locked-in rate. As a perk, students also can choose which federal student loan carrier they want to use.
Currently, there are 11 options for carriers on the Federal Student Aid website. Morgan said students shop around for loan servicers with a user-friendly website, flexible payment options and good customer service.
She also said payers should remember to make a note on payments that are larger than the minimum amount to apply overpayment toward the principle, not interest. Lenders have to honor the request.
Morgan wants students to know loans shouldn’t be feared. They’re a great investment when used wisely.
“It’s relative. If you had to have a car to get to work or had to have a house, you’d find a way to make it happen,” she said.
Tips
Kathryn Morgan in FSU Panama City’s financial aid office said scholarship money often is overlooked. She advises students to look for:
- Companies and charities that give excess profits back to scholarship programs.
- Grants and scholarships offered by the department of the program applied to.
- Funding offered by sources related to special interests, not necessarily the area of study.
- Easily missed application deadlines.