There are two government loans for college -- the Direct Stafford Loan for students and the Plus Loan for parents -- both interest rates are going up for the 2018-2019 school year. The student loan rate will increase on July 1st to 5.1% for the 2018-2019 academic year. This is up from 4.45% last year. The student is limited to borrowing $5,500 freshaman year and will have to pay a 1% origination fee to borrow the money. This increase means your child would pay $300 more in interest over a ten year period. The loan repayment starts six months after graduation or upon leaving school. The government loans are fixed rate loans; however each year you will have to get a new loan and each year the government releases a new interest rate.
Parents can borrow up to the cost of education for that school year, the interest rate will be 7.7% up from 7% and the origination fee will be 4.4% and payments start immediately. Credible.com has a handy loan cruncher that will provide you with a clear breakdown on how much you will pay back for the principle and interest.
Tidbit: All the interest paid on the student and parent loans help to offset the cost of the Affordable Healthcare Act.
College Planning Services helps families minimize their need to borrow by helping them qualify for free scholarship money from the college of their choice. Please click here to request a free telephone consultation with John DeLorey.