<p>I'd like to know the opinions of the parents who have students with UNSUBSIDIZED loans. Do you pay the interest for your students while they are in school? 6.8% is not a very low interest rate, and over the 4 years if the interest is deferred, that will make a difference in the payment after graduation. </p>
<p>With the 6.8% interest rate for the Unsub loan compared to the 8.5% parent plus loan, do most people usually borrow the max in the student's name before they consider the Parent loan? Even if the parent is planning to pay back the loan after graduation? What are the drawbacks to doing this? I understand the student would be left with the loan if something happened to the parents (or if the parents changed their mind about paying), but other than these issues, any other pros or cons? </p>
<p>better to borrow in student’s name for lower rate.</p>
<p>If you CAN afford to pay the interest while in school on UNsubsidized loans, it is good to do that, because you if you don’t, you are accruing interest on interest and after 4 years that will add up. Run the numbers</p>
<pre><code>Initial Loan Balance: $5,500.00
Loan Interest Rate: 6.80%
Deferment (Months): 48
Capitalization Frequency: Quarterly (I don’t know if this is the correct choice for how the interest is done)
</code></pre>
<p>After the deferment period of 48 months, the new loan balance is $7,202.74 , including $1,702.74 in accrued interest.</p>
<p>For our daughter, she will have $2,000 of unsubsidized loans in the first year (not sure how things will shake out in the future) but at 6.8% that’s only $136/year for the four years. We’ll be happy to cover that (and most likely future unsubsidized interest costs) to ensure she graduates with manageable debt.</p>
<p>If the parents or students can pay it, they should. Whether parents pay for it or not is one of those financial situation that have to be made. We are paying our son’s.</p>
<p>The first year my d paid it herself out of her savings account. That year the rate was 3.61. The next three years were each 6.8%. She took the total unsubsidized Stafford loans available each year, the total is now around $17,000. Now that she is a senior and the interest is over $1000 per year. So I am paying it for her.
I think these interest rates are ridiculous and the proposed changes (rates lowering a bit over the next few years) are not going to help these kids at all, they are fixed at 6.8%. And as I understand consolidation probably won’t help much; doesn’t that just lower it to the average (in this case 6%)?
Sorry for the rant; yes I am paying the interest on her unsubsidized loan.</p>
<p>Are there any plans to lower this rate for unsubsidized loans? I didn’t realize unsub had ever been as low as 3-4%–that would be much more reasonable for a student! </p>
<p>Seeing Sueinphilly’s example certainly shows why so many people are in trouble with outrageous loan amts. when they put them into deferrment or forbearance even after they have graduated. I’ve heard the nightmare stories of how people’s loan amts. have doubled and tripled as they delay paying them back, sometimes just because their salary out of college won’t cover them. All of a sudden $20k is 40k, etc.</p>
<p>BTW, the interest rate on unsubs is not dropping. Sub interest rate drops to 5.6% (from 6%) July 1; unsub remains at 6.8%. The government is oh-so-kindly considering increased access to loans (which I assume will be unsub). I’ve said it before & I’ll say it again: student loans will be the next big bail out. Those of us who pay will probably end up paying our own AND for those who “can’t” pay for what they owe. When students borrow $54,500 as undergrads, I wonder how the new jobs our economy is creating will allow them to repay their loans — the new jobs are paying a whole lot less than the ones we have enjoyed in recent years. More degrees … fewer jobs … lower pay. I see trouble on the horizon.</p>
<p>I thought I read somewhere that there was a proposal to lower the unsub staffords but I cannot find the link…and anyway that would not affect the loans that are already disbursed.
My son graduated in 2005 and I think his ranged from 2.8 to 6.8, he consolidated for around 4% which is not too bad.</p>
<p>Consolidation rates have gone way up, unfortunately. It’s also true that previously borrowed unsub loans will carry the same rate even if rates for new unsubs decline. No luck on them declining this year, though, and I haven’t heard any rumors of declining unsub rates in the near future.</p>
<p>“student loans will be the next big bail out. Those of us who pay will probably end up paying our own AND for those who “can’t” pay for what they owe.”</p>
<p>I think you’re spot on. Remember, Obama and his wife struggled for years with unpaid student loan debt, and only paid it off after he made millions on his book. So there will be sympathy there-- </p>
<p>I can hear the verbiage now, about the poor hapless graduates encumbered by crushing amounts of debt, not able to afford a home, or a car payment, or pay the rent, due to their student loan debt.</p>
<p>When parents budget college costs, it’s important to factor in the repayment of the loans which begin nearly right away with the Plus. Because the Staffords are lower, it’s better to take the maximum Stafford before hitting the PLUS. However, look at what you are doing if you are paying the Staffords interest rate while your student is in school as you take out plus loans. It is financially more prudent to take out less in PLUS and not repay the Stafford interest while the student is in school.</p>
<p>The models get confusing. Gotta write it all out, or else you will be paying 8% to repay a 6% loan. I know folks doing it (no, I’m not-we are setting the money aside in hopes so that the accumulated interest does not get overwhelming and freak out our son). I think the first math model he will have to do for us is one to show us the best way to pay off these student loans.</p>
<p>I saw this yesterday… Income Based Repayment …it says that “those who owe more than they make will definitely qualify”…I understand wanting to help people manage their loans but won’t this encourage folks to borrow way too much if they know their payment will be capped at 15% and be forgiven after 25 years?</p>
<p>“Unlike its predecessor, Income Contingent Repayment, IBR is not just for loans made by the Department of Education but covers most types of federal loans made to students, including Stafford, PLUS and consolidation loans.”</p>
<p>PLUS loans can be forgiven??</p>
<p>“These kinds of programs really will give students the peace of mind that they need to go into public service,” she said. “Luckily that helps everyone else in our society too,” Irons added.</p>
<p>Well, peace of mind for students who over borrowed is certainly high on my list of concerns to address with my tax dollars. Federal, State, and local government employees are eligible under the definition of “public service.” Another inducement to grow government even bigger. Blah.</p>
<p>I know there have always been ways for students to get some of student loans “forgiven”. Work in certain fields, including teaching in high demand areas is one way. It is not easy to get out of these federally backed loans as many student from our generation has discovered. The federal government will spend a million bucks to go after a dime it is owed.</p>