NASFAA advises students to take a look at their student loans as federal student loan interest rates are set to increase for 2014-15.
Washington, D.C. (PRWEB) May 08, 2014
As students receive and begin reviewing their financial aid packages for the 2014-15 school year, the National Association of Student Financial Aid Administrators (NASFAA) advises them to take a look at their student loans since federal student loan interest rates are set to increase.
President Obama last year signed into law a bill that ties student loan interest rates to the 10-year Treasury note auctioned off before June 1. Based on yesterday’s auction, NASFAA projects the 2014-15 interest rates for all Direct Loans with a first disbursement on or after July 1, 2014, will be as follows:
-4.66 percent for Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate students;
-6.21 percent for Direct Unsubsidized Loans for graduate/professional students; and
-7.21 percent for parent and graduate PLUS Loans.
These interest rates were calculated using a base 10-year Treasury note Index of 2.61 percent, plus an add-on amount for each loan program. As with last year, all Direct Loans except Direct Consolidation Loans are “variable-fixed” loans, meaning students will receive a new market-based rate with each new loan taken in subsequent school years, but that the rate is fixed for the life of each loan.
“Though these interest rates have risen from last year, they remain a less expensive and safer option than other forms of credit for the majority of students and families,” said NASFAA President Justin Draeger. “Federal loans offer borrowers more flexible repayment options than loans from banks or other private sources and provide strong safeguards in case of unemployment, sickness, or disability and contain loan forgiveness options for those employed in the public or non-profit sector.”
Understanding the ins and outs of applying for federal financial aid can be a daunting process, but financial aid professionals are an invaluable resource and can assist students and parents in securing the financing needed to pay for their education.
NASFAA recommends students bear the following in mind when borrowing to fund their education:
1. Only take what you need. After you’ve estimated your total cost of college, your gift aid, and the difference between the two, work with your financial aid administrator to borrow only enough to cover necessary funding gaps.
2. Map repayment estimates to salary projections. Some experts say that a manageable student loan payment will be 10 percent of a borrower’s take-home pay. Once you know how much you’ll need to borrow, you can use the Federal Student Aid calculator to estimate your monthly payments.
3. Carefully research the interest rates, terms, and conditions of any loan you consider. Asking questions up front can help to eliminate confusion in repayment. Read more advice from NASFAA about ways to be a smart student loan consumer.
4. Routinely reevaluate your loan amounts. Keep tabs on how much you have borrowed using the National Student Loan Data System. Do you have leftover loan dollars that did not go to vital expenses? If so, work with your financial aid administrator to lower the amount you’re borrowing.
NASFAA has experts available to speak to reporters as they write about student financial aid issues. Please contact us at news(at)nasfaa(dot)org for additional information or to schedule an interview.
The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents nearly 20,000 financial aid professionals at approximately 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the U.S. Based in Washington, DC, NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit http://www.nasfaa.org.