NEW YORK (MainStreet)Increasingly often, the American population leavesan undergraduate or graduate institution with debt from student loans. Most people spend years repaying their student loans, usually taking a decade or two. Of course, the longer you take to pay back a student loan, the more it will cost you. However, there are ways to decrease the interest rate on your student debt for both federal and private loans.
According to student loan expert, Heather Jarvis, attorney and founder of AskHeatherJarvis.com, a growing number of first time college entrants are getting federal unsubsidized loans. Undergraduates are choosing the Stafford Loan option, which carries a fixed rate of 3.4%, while graduate and professional students are taking PLUS Loans that currently offer a fixed rate of 7.9%. Because Congress sets the interest rates for federal loans, there is a concern that interest rates will go up unless a cap is put in place. In fact, the interest rate on new Stafford Loans is set to double starting July 1 from 3.4% to 6.8% if Congress does not act on preventing the increase.
Despite which federal loan is involved, lowering the interest rate can enable the borrower to pay debt on time and at a faster pace. One solution, Jarvis suggests, is to "set up automatic direct debit payments," which will reduce your rate about 0.25%. Another option, according to the website StudentAid.ed.gov, is to go with the "Standard Repayment Plan," which requires fixed payments of $50 every month but allows you to take up to 10 years to pay off your loan. This approach will enable you repay your debt in a timely manner at a lower interest rate. Consolidation, Jarvis reveals, is a third option for those who took out their loans before 2006. Because loans taken out prior to 2006 were at variable rates, Jarvis highly suggests that now is the time to consolidate in order to get a lower fixed rate, which will, in effect, save you money.