Interest Rates and How They Affect Your Student Loans

Interest Rates and How They Affect Your Student Loans

The Effect of Interest Rates is Far From Simple

If you have student loans, you may be wondering how interest rates affect your student loans. It’s a good question. The effect of interest rates is far from simple, because the interest rates themselves can vary depending upon the type of loan, when you received it and your own credit rating.

Interest Rates: General Facts

Let’s start with some straightforward facts about interest rates in general. Interest rates are charged on all loans, of any type. An interest rate is the cost of getting a loan; the lender is paid for providing the loans, in a sense, by charging a certain amount of interest. It is one of the ways lenders make income to stay in business.

If you or your parents have a mortgage, you will be charged interest. If you have a car loan, you will be charged interest. Student loans are no different.

The higher the interest rate, the most you will pay in interest on loans.

Interest rates do not remain static. They march up and down depending on economic conditions. The U.S. Federal Open Market Committee is responsible for meeting to determine whether the economy is reasonably strong or weak, which they do by analyzing economic data around the country. If it’s strong, they sometimes raise the rates to rein in inflation. If it’s weak, they may lower rates. lower rates.

All loans of any type can be divided into one of two categories: fixed rate and variable rate. Student loans are no different.

The term “fixed rate” means that the interest rate will be fixed throughout the life of the loan. In other words, if your interest rate is 6.85%, it will always be 6.85%, until the loan is paid off.

The term “variable rate” means that the interest rate will vary throughout the life of the loan. Initially, it may be 3.25%, but it could rise gradually to 12% or more.

This is important because it has payment amount implications. The higher the interest rate, the more money you will pay, both per month and over the life of the loan.

A fixed rate may be slightly more expensive, but your payment will always be the same. A variable rate might start out with a low payment, but your payments may increase over time, both monthly and over the life of the loan.

Federal Student Loans and Interest Rates

If you’ve completed the Free Application for Federal Student Aid (FAFSA) and been approved for a loan, you have a Federal student loan. Although the U.S. government grants and issues these, it’s important to know that they are serviced by private companies. You will receive bills from those private companies, such as Navient and Nelnet.

All Federal loans have fixed interest rates, so once you get a loan, your payment will not vary.

Interest rates on Federal student loans are set annually by Congress. The rate each year is based on the interest rates in existence that year. They are not based on your credit rating, earnings or ability to repay the loan.

But, because they are set each year, you may have a different interest rate than a sibling or cousin who received a Federal student loan several years ago. Because interest rates change year to year, they could be higher or lower.

There is one exception to this. The interest rates for Federal Perkins loans are always set at 5 percent.

One further wrinkle in Federal student loan rates is whether they are subsidized or unsubsidized. If they are subsidized, the Federal government pays the interest as long as you are still in school. If they are unsubsidized, they accrue while you’re in school. When the loan repayment period starts, that accrual is added to the principal. (Principal is the original amount borrowed.)

The addition of the accrual is called capitalization. It will make the amount of the loan you repay larger than the original principal amount your borrowed. In other words, if you borrowed $20,000 in an unsubsidized loan and $5,000 in interest accrues while you complete school, you will have a total of $25,000 to repay. In addition, of course, interest once you start to repay will be charged on $25,000, not $20,000.

Private Student Loans and Interest Rates

A number of lenders issue private loans, including Wells Fargo, Discover and Sallie Mae. Their interest rates are generally go higher than the Federal loans rate, in a range from 2.78 percent to 12.99 percent. Private lenders do take your credit score into account. It is one of the factors that affect the interest rate you’ll receive.

Private lenders can offer fixed or variable rate loans.

In general, the better your credit score, the lower the interest rate. Other factors that affect it include the term (number of years) of the loan, whether it is variable or fixed, your income, how much credit you have and the lender’s determination of ability to pay.

The effect of interest rates on your student loan is a complicated subject because loans themselves vary, as do interest rates, the amount of student loans you have, your lender and your credit rating. Use this as a guide to getting the best possible rate on your loan.

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I'd Rather Be Single Than Settle – Here Is Why Being Picky Is Okay

They're on their best behavior when you're dating.

Dating nowadays described in one word: annoying.

What's even more annoying? when people tell you that you're being too "picky" when it comes to dating. Yes, from an outside perspective sometimes that's exactly what it looks like; however, when looking at it from my perspective it all makes sense.

I've heard it all:

"He was cute, why didn't you like him?"

"You didn't even give him a chance!"

"You pay too much attention to the little things!"

What people don't understand is that it's OKAY to be picky when it comes to guys. For some reason, girls in college freak out and think they're supposed to have a boyfriend by now, be engaged by the time they graduate, etc. It's all a little ridiculous.

However, I refuse to put myself on a time table such as this due to the fact that these girls who feel this way are left with no choice but to overlook the things in guys that they shouldn't be overlooking, they're settling and this is something that I refuse to do.

So this leaves the big question: What am I waiting for?

Well, I'm waiting for a guy who...

1. Wants to know my friends.

Blessed doesn't even begin to describe how lucky I am to have the friends that I do.

I want a guy who can hang out with my friends. If a guy makes an effort to impress your friends then that says a lot about him and how he feels about you. This not only shows that he cares about you but he cares about the people in your life as well.

Someone should be happy to see you happy and your friends contribute to that happiness, therefore, they should be nothing more than supportive and caring towards you and your friendships.

2. Actually, cares to get to know me.

Although this is a very broad statement, this is the most important one. A guy should want to know all about you. He should want to know your favorite movie, favorite ice cream flavor, favorite Netflix series, etc. Often, (the guys I get stuck on dates with) love to talk about themselves: they would rather tell you about what workout they did yesterday, what their job is, and what they like to do rather than get to know you.

This is something easy to spot on the first date, so although they may be "cute," you should probably drop them if you leave your date and can recite everything about their life since the day they were born, yet they didn't catch what your last name was.

3. How they talk about other women.

It does not matter who they're talking about, if they call their ex-girlfriend crazy we all know she probably isn't and if she is it's probably their fault.

If they talk bad about their mom, let's be honest, if they're disrespecting their mother they're not going to respect you either. If they mention a girl's physical appearances when describing them. For example, "yeah, I think our waitress is that blonde chick with the big boobs"

Well if that doesn't hint they're a complete f* boy then I don't know what else to tell you. And most importantly calling other women "bitches" that's just disrespectful.

Needless to say, if his conversations are similar to ones you'd hear in a frat house, ditch him.

4. Phone etiquette.

If he can't put his phone down long enough to take you to dinner then he doesn't deserve for you to be sitting across from him.

If a guy is serious about you he's going to give you his undivided attention and he's going to do whatever it takes to impress you and checking Snapchat on a date is not impressive. Also, notice if his phone is facedown, then there's most likely a reason for it.

He doesn't trust who or what could pop up on there and he clearly doesn't want you seeing. Although I'm not particularly interested in what's popping up on their phones, putting them face down says more about the guy than you think it does.

To reiterate, it's okay to be picky ladies, you're young, there's no rush.

Remember these tips next time you're on a date or seeing someone, and keep in mind: they're on their best behavior when you're dating. Then ask yourself, what will they be like when they're comfortable? Years down the road? Is this what I really want? If you ask yourself these questions you might be down the same road I have stumbled upon, being too picky.. and that's better than settling.

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11 Financial Tips For College Grads Who Don't Know Where To Start

Most people learn how to navigate their finances as they go, at the cost of making several mistakes and starting good habits later than they should've. Don't be like most people!


Adulting is hard, especially when it comes to money. If you're like me and you took a personal finance class in high school or college, you probably don't remember much because the information wasn't relevant to you at the time. Well, now you're almost done with college and you're ready to be welcomed into the real world as a freshly-minted adult. Suddenly you realize that class was probably one of the most important classes you ever could've taken.

Here are 11 tips to start making money moves today.

1. Start building your credit

It may not seem important now, but it's a good idea to start building your credit early. In three to five years or so, when you're ready to apply for a car or home loan, you're going to want to be approved to get the best interest rates, and that means having a credit score of at least 760. See tips two and three for more on how to increase your credit score.

2. Open a credit card if you don't have one already

One huge factor in your credit score is how long your oldest credit card account has been open, so you want to make sure to start early. A first card many people get is called a "secured" credit card, which basically acts like a debit card so the bank knows you won't go all "Shopaholic" and max it out. Make sure to pay every single one of your monthly payments on time and in full. No excuses, no exceptions.

3. Make all of your student loan payments on time and in full


4. Embrace the concept of paying yourself first

Paying yourself first is a concept that many millionaires, even billionaires, swear by. Decide how much of your income you want to save. Then set up a portion of your paycheck to deposit directly into your savings before you can even think about it. The rest can go to your checking account for spending on bills, food, rent, and other expenses.

5. Build a three- to six-month emergency fund

Did you know that 33% of Americans would struggle to pay $1,000 in an emergency? This is a serious issue. You don't want to ever experience living "paycheck to paycheck," let alone have a minor crisis throw your life upside down. That's why you're going to build this emergency fund before you do anything else with your money. Think of this fund as something that you can't touch until you absolutely need it. If and when that time comes, you'll know, and you'll be so grateful that you were smart and were prepared.

6. Open a Roth IRA

There are so many things to be said about Roth IRAs and why you should get one as a new college graduate. In short, IRA stands for Individual Retirement Account. A Roth IRA is unique because any money you put into it is taxed now, so you won't have to pay taxes on it when you're retired and ready to use it. The main benefit: you also won't have to pay any taxes on the money you earn in the account. In addition, because you're young, you get to take advantage of the power of compound interest for a long time before you retire. This could potentially earn you hundreds of thousands of dollars. The best time to open a Roth IRA was yesterday. So go do it now!

7. Contribute as much as possible to your 401k

A 401k is basically an investment bank account that you can't use until you retire, and it will be taxed once you start using it (so it is not taxed now). Many employers offer 401k matching, and they open one up for you when you start your first job. If your employer offers 100% matching up to 6% of your salary, that means that if you can afford to put 6% of your income into your 401k, your employer will also contribute the exact same amount. Listen to me: this is free money. I like free money. You like free money. Take it.

8. Open a high-yield savings account

This is 2019. Don't keep your money in cash or in a regular savings account, where it'll depreciate 2-3% in value every single year it sits there. Get yourself a high-yield savings account, in which interest rates are anywhere between 2.0 and 2.25%, and watch your money make money while you sleep.

9. Start tracking your spending

Since it has become much easier to make quick and painless purchases these days, you should definitely be aware of your spending. I personally like to use a free app, like Mint, that does all the work for you because it puts all of your financial accounts (ie. savings and checking accounts, investments, loans, assets, etc.) into one place.

10. Create a monthly budget for each of your spending categories

These include food, housing, transportation, entertainment, subscriptions, health and wellness, and maybe more. You should know the things you always buy on a monthly basis and how much they typically cost. Comparing your budget to what you really spent after a month will show you exactly where your weaknesses are. Try to stay at or under your budget for each category every month unless there's an unusual event, like a vacation or a car repair.

11. Learn the basics of investing

Compared to the other tips on this list, this is one you can put on the back-burner for a bit. However, that doesn't make it any less important. It's critical for everyone who is financially independent to understand the basics of stocks, bonds, Exchange-Traded Funds, Mutual Funds, REITs, and more that you can use to diversify your portfolio, including in your new Roth IRA and 401k!

What are you waiting for? Up your financial game!

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