This will be an incredibly big week for college students and their parents, since it appears as though Congress will vote on the latest bipartisan proposal to solve the student interest rate issue. As of July 1, interest rates on subsidized student loans (those designed for the neediest students) increased from 3.4% to 6.8%.
If this increase is left as is, the current student debt crisis—a crisis that has been written about and discussed for several years now, a crisis that has seen student debt grow to more than 1 trillion dollars (surpassing credit card debt), a crisis that has led many young people to postpone major post-college life decisions, such as marriage, that they can’t afford, and that has led many other young people to forgo college altogether—will only get worse.
Congress will vote, however, on a proposal that will tie interest rates to the 10-year Treasury bill, with an adjustment for administrative costs. This rate, proposed at 3.85% for the upcoming academic year, would be lower than the new 6.8% rate. All undergraduates would pay the same rate, eliminating the lower rate that has been offered in the past to the students who demonstrated the greatest financial need. The proposal, thankfully, also includes a cap at 8.25%, to protect future borrowers from substantial rate increases.
It is critical that you contact your legislative leaders and encourage them to vote yes to this bipartisan compromise. It is also critical that you encourage them to commission a task force to examine the bigger-picture questions that haunt college students and their parents:
That being said, individual families cannot wait for the federal government to solve this student debt problem for them.
For quite some time, I have advocated for enhanced college financial literacy in our high school classrooms. We all have to take responsibility to educate our children about the long-term financial impact of debt. Parents especially have to arm themselves with knowledge about the process of searching and paying for college, to empower themselves to make the best decisions for their family.
That’s why I created my online Financial Fit® program, which guides families step-by-step through the process of determining how much you can afford to spend on college, finding great schools you can afford, and understanding all of your paying-for-college options.
These steps, which I developed based on more than 30 years of experience working with thousands of families one-on-one and speaking to hundreds of thousands of families through my seminars, ensure that every family can find an affordable college option, without incurring excessive debt or jeopardizing their financial futures.
If you believe that the student debt crisis must be resolved, contact your Congressperson now and encourage him or her to vote yes to the proposed bill. Also encourage him or her to take this matter of college costs into serious consideration, in order to develop a more comprehensive, long-term solution.
And finally, take control of your own situation by learning from my Financial Fit method and using the resources available to you on College Countdown to ensure that you can provide your student with a high-quality education, without falling, as so many others have, into the trap of college debt.
Do you know how to control college costs and make the best college decision for your family?