07.23.08 | Why Falling Interest Rates Matter
Federal Stafford loan interest rates have been on a steady incline since 2003-2004, but that has finally changed. Effective July 1, 2008 subsidized Stafford Loans decreased from 6.8% to 6% fixed. That is the largest interest rate drop federal loans have seen in nearly seven years. And it came not a moment too soon. Interest rates matter.
If you’re like me when I was 18 you may be thinking, “Whatever, 6%, 6.8%, or 10% I don’t really care. I’ll worry about the bill later.” And if that is the misguided logic you operate under than shame on you. I wish I could go back in time and kick my own fanny. I was a complete nitwit! Now clarity of thought and not naivety of youth serves as my ally. That said, the financial ramification of my poor decisions when I was younger still looms heavy over my head today. I want better for you.
Below is a cost comparative between student loans at 6.0% versus student loans at 6.8%. You may be surprised by the amount of money you save over a 10-year period.
| Subsidized Stafford Loan - 6.0% | Subsidized Stafford Loan - 6.8% |
| Starting Loan Balance $45,000 | Starting Loan Balance $45,000 |
| 10-year loan term | 10-year loan term |
| Total Interest Paid: $14,951.07 | Total Interest Paid: $17,143.40 |
As you can see that’s a $2,200 savings over the standard 10-year loan term assigned to federal loans with the lower 6% interest rate. That said most students don’t pay off their loans within 10 years. Many students choose to consolidate after school to lower their monthly payment. Consolidating extends your loan term which does minimize your monthly payment in the short run but you pay back more in the long run.
For example if you have $45,000 in loans you may extend your 10-year loan term to a 25-year term. The cost disparity in that case jumps from $2,200 to over $6,700! It doesn’t take much to get that ball rolling in the wrong direction.
The fact is you are in a better place today than you were one year ago at this time. Take advantage of the lower 6% interest rate! I am the best kind of hypocrite. I did everything wrong so you could everything right.
Apply now for a Stafford Loan and take advantage of the low rate!
If you’re a member of www.ScholarshipPoints.com you can use the code SAVSHOWME to earn 15 scholarship points.
Thanks for the information.
July 24th, 2008 | #
How many loans can you take out at one time? I already have 2 loans, now and will this make a difference if I was to apply for another or will it just add on to the ones I already have. Thank you, very much.
July 24th, 2008 | #
$2,200.00 means a lot to me and my single mother who is researching as many sites as she can to find financial aid to send me to dental school.
July 25th, 2008 | #
Low interest rates are nice as they do save you money in the long run, especially if you can pay off loans early.
July 25th, 2008 | #
With the economy being what it is, saving money because of lower interest rates is great.
July 25th, 2008 | #
In this economy everything helps!
July 28th, 2008 | #
thanks
July 28th, 2008 | #
$2200 is no drop in the bucket!
I need to save everywhere possible!
August 4th, 2008 | #
I was granted a 3500 subsidized loan but it stays unlogged with my college, how to resolve this, college lines are too busy. How can I go thru your office to resolve it or push it further.
August 19th, 2008 | #
If I already have Stafford loans out at 6.8%, is there a way to refinance them to the new 6%?
I was told that if I refinanced a government loan, it no longer falls under “federal” jurisdiction, allowing the lending agency to play by its own rules instead of whatever the government guarantees. So how can I take advantage of the new lower rate?
October 3rd, 2008 | #