How much college debt is too much college debt? The New York Times recently reported that the average loan indebtedness for the class of 2011 increased 5 percent to $26,500 — the previous year’s figure was $25,350. We asked our College Coach finance experts to weigh in. Here’s what a few of them had to say…
College students won a small victory this week when Congress, facing a July 1st deadline, extended low interest rates on undergraduate Subsidized Direct Loans for a year.
The Subsidized Direct Loan is a federal loan program for needy college students. The loan is interest-free while the student is enrolled in school, and begins accruing interest at a fixed interest rate after the student graduates or drops below half-time attendance. The interest rate, fixed at 6.8% in 2006, was gradually lowered for loans borrowed since 2008 to the 3.4% rate, in effect for the 2011-2012 academic year. This reduced rate was set to expire on July 1st, which would have doubled the interest rate for future borrowers.
Student loans have been all over the news lately, and most of the news has been pretty frightening. The Boston Globe recently reported that outstanding student loan debt now totals $870 billion, surpassing both credit card and auto loan debt as a fraction of the economy, with over 14% of borrowers currently delinquent on payments. And the Washington Post detailed how Americans over age 60 still owe approximately $60 billion in student loans, borrowed either for themselves or to help put children or grandchildren through school, putting the retirement of older borrowers at risk.
While student loan statistics are scary, your family does not have to be a statistic. The key to using student loans successfully is to consider them a part of your college financing strategy, not the whole. Want to use them the right way? Take the following advice from our college financial planning experts: