If you're a college student, a prospective college student, or the parent of some such person, take note: Congress is looking to pass the largest cut in student financial aid in American history. Yikes!
Does this mean that you'll have to forget your dream of Junior walking up to the podium at Harvard or Brown's graduation ceremony in his cap and gown? Will Junior be living in your basement till he's 40, getting an online education via the Apollo Group
Here are some details on the cuts: They'll total nearly $13 billion over five years, beginning this July. We can expect interest rates on subsidized Stafford loans to jump to a fixed rate of 6.8% from current levels, which can be as low as 4.7% for those still in school. Parental loans won't be spared, either, with their interest rates expected to rise from 6.1% to 8.5%.
Don't gnash your teeth about all this quite yet. You can minimize the damage. If you're a consumer of student loans, look into securing your next loan as soon as possible, before rate hikes take effect. That means you too, parents -- look into PLUS loans! (PLUS stands for Parent Loan for Undergraduate Students.)
If you've already got some student loans under your belt, consider consolidating them. The folks at College Loan Corporation (CLC) point out that, "For graduates, if you haven't consolidated your student loans, you can save thousands of dollars by doing so before the July 1 rate increases, securing a rate of as low as 4.75% for the rest of your repayments. That's especially important for the millions of students in the class of '06. They'll have a very small window to apply. By consolidating now, students and parents can lock in the lower rates. For example, someone with $60,000 in loans can save more than $7,000 over the 10-year repayment period."
The CLC also offered some other tidbits:
- 60% of students graduate with student loans, and the average debt is just under $20,000.
- Tuition costs are also increasing. A recent report by the College Board confirmed that the average yearly cost of attending four-year public colleges increased by 7.1% last year -- more than double the rate of inflation -- to $5,491. At private four-year colleges, the average cost increased by 6% to $21,235.
Here are some Fool articles on student loans and paying for college:
- Get Record-Low Rates
- You Can Pay for College
- Advice for College Freshmen
- Starting Late at College Savings
You'll find lots of additional tips on 529 plans and on paying for college in our College Savings Center. Our Paying for College discussion board is a good place to ask questions you may have, and our book, The Motley Fool's Guide to Paying for School, by Robert Brokamp, is also a handy resource.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.