The Money Mentor: Student Loan Debt Continues to Rise with Interest Rate Hike

26 Apr

By:  Lorillia Brown-Phillips, The Money Mentor, Your Black World

In the next coming months the current subsidized student loan interest rate of 3.4 percent will be expiring  and the new increase tax rate will be 6.8 percent.   The increase interest rate hike could increase some student loan payments an extra $1,000, which could impact 7.4 million students according to the White House.

Who will be affected

Federal  subsidized student loans that were disbursed  to undergraduate students after July 1, 2011, are the only type of student loans that will be affected by this rate increase .   Student loans that were disbursed prior to July 1, 2011 carried an interest rate of 5.6 percent and higher.  Many industry analyst say that this interest rate hike will only add to the $1 trillion in student loan debt that’s outstanding.   Currently 84 percent of student loan debt is underwritten by the federal government, and that number is expected to rise to mid-90 percent range in coming years.

Remedy for graduating students

Although statistics has shown that student loan debt payments have not increase as rapidly as inflation.  Many college lending experts say,  the cost of college has increased about 498 percent since 1986, while the rate of inflation over that same period has only been 115 percent.  How can students manage their student loan debt,  without facing the chance of a student loan default?  Students who are facing a financial hardship and find making student loan payments difficult, they should contact their loan servicer early after graduation to discuss what options they have available to them.  Those options could result as a deferred payment plan or an income base repayment plan.

About the Author:  

Lorillia Brown-Phillips is a Financial Literacy Educator and Author of “Jump Start Your Credit: How to Negotiate and Settled Your Debts in 10 Steps”, she can  found at:  www.yourmoneymentor.com

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