This Week In Your Wallet: Student Loan Interest Rates Hit Historic Lows
We’re starting off this week with some good news for future student loan borrowers and parents: Any federal student loans issued after July 1 will be roughly half a percentage point cheaper than last year. More specifically, undergraduate student loans will carry a rate of 3.76 percent, down from 4.29 percent –– and graduate students loans a rate of 5.31 percent, down from 5.84 percent.
This year’s college graduate walked off campus with an average of $37,000 in student loan debt. The country’s current total? Over $1.3 trillion, according to MarketWatch’s national student loan debt clock (which you can see the number climb in real time about $2,726 every second).
Will these lower rates help? Yes. In fact, they could save you as much as $360 over the course of your loan. And for more savings, I recently listed some options for student loan borrowers (past, present and future) on TODAY. Here, a few to consider:
- Consolidating your federal loans. This won’t necessarily lower your interest rate, but it could make the debt easier to handle — it rolls everything into a single loan (i.e. a single payment).
- REPAYE (Revised Pay As You Earn) program. Explore this option before looking into refinancing with private lenders. Under this program, five million direct loan borrowers can cap monthly payments at 10 percent of what they’re earning — and after 20 years of payments for undergrads (25 for graduate degree holders), anything you owe will be wiped clean.
- Refinancing loans with a private lender. Generally, you’ll need $10,000 in loans or more, a stable job, a steady income and in some cases, a college degree. The better your credit, the lower interest rate you’ll likely qualify for. Check out MagnifyMoney.com for a list of potential lenders.
Get Ahead On Your Tax Game
Speaking of cutting bills, Kiplinger has midyear strategies to cut your 2016 tax bill. Among them, closing the books on 2015 if you filed for an extension, checking up on tax changes if you’re moving to a new state and boosting your retirement savings. For the latter, the maximum possible contribution for 401(k) and 403(b) plans is the same as it was last year: $18,000 if you’re under 50 and $24,000 for those age 50 and older. Another tip? When you’re feeling generous, consider making a donation of stocks, mutual fund shares or real estate instead of writing a check. If you’ve owned the asset for more than a year, you can deduct its full market value, not just what you paid for it.
Stock-Sensitive
While we’re talking assets and portfolios — only one in three millennials are investing in the stock market, according to a new report from Bankrate. Why are so many (still) opting out? The two biggest reasons cited were neither having enough money nor knowledge about the market. If that’s you, Investopedia has a tutorial for beginners –– and free apps like Acorns, which invests the spare change from users’ debit card purchases, are another place to start.
Savvy Summer Spending
Summer is travel season for many of us, and according to research cited by CNBC, many American travelers rack up an average of about $1,500 in credit card debt while away. And with a high interest rate, that amount has the potential to grow significantly before being paid off. Another interesting finding cited by CNBC? The amount of vacation debt seems to increase with age. Millennials ages 18 to 29 accumulated an average of $1,100 from their trips, whereas the average for those over 60 was $1,600. Excess baggage charges and ATM withdrawal fees/credit card charges were among the top listed travel rip-offs.
So what can you do to avoid the debt? Create a budget and track expenses for the trip — plus, try to negotiate a lower interest rate on your credit cards. If you can, save part of every paycheck in a “vacation” fund if you’re already set on retirement contributions and your emergency fund. And if you really want to keep yourself in check, traveling with a prepaid credit card and spending just that amount on the vacation is an option.
Have a great week,
Jean
