By Jim Donovan
PHILADELPHIA (CBS) — In Washington D.C. today, President Obama signed a $105 billion transportation bill. Over the next 27 months, the bill will fund current highway and mass transit programs. As strange as it may sound, 3 On Your Side Consumer Reporter Jim Donovan tells us that this bill signing will come as welcome news to many college students, too.
That’s because this bill also included a provision that freezes the interest rate on subsidized Stafford loans for another year. The current 3.4-percent interest rate was set to double if Congress hadn’t approved the extension and would have affected an estimated seven million students, including incoming freshman.
Navigating student loans can be complicated, especially for soon-to-be college freshmen and their parents. Eric Bell, of the personal finance website YoBucko.com, says one important rule applies to both government and private loans, and that’s reading the fine print.
“You need to understand the terms of those loans. You need to understand the grace periods — how long it takes between the time you graduate and until you actually have to start repaying that debt. So don’t forget that those loans do accumulate interest, and those are loans. You have an obligation to repay those,” Bell says.
Bell also recommends thinking ahead to life after graduation. Will salaries in your chosen field put you on track to pay back what you’ve borrowed quickly? For those who’ve just graduated, create a budget that includes those loan payments. Paying on time now may pay off later.
According to Bell, “Taking out student loans, it might seem like it’s a bad thing, but it does help you build a strong credit history. If you pay those loans back on time, you can get lower interest rates in the future, by building a stronger credit history.”
If you’re having trouble, don’t be afraid to ask your lender for help. Defaulting on student loans can derail a financial future.