Many students worry about student loan payments once they graduate. To begin with, these bills will become priority because the government tends to be a less-than- forgiving creditor. When faced with a choice between paying the government and being a little late with another bill, keep in mind that defaulting Uncle Sam will damage a student's credit much worse than a private loan.
"Don't default on those government loans. Nothing will hurt your credit faster," said Nathan Crozier, a senior student financial assistance counselor with GW Student Financial Aid.
"I just hope I get a job that'll pay for (school) pretty quickly ... I know I'll be working my way through law school," said junior Andrew Dubinsky. "Tuition's part of (my financial problems). I mean, why am I paying more for GW than for Princeton or Harvard?"
There are two types of loans students will have to pay back. Subsidized loans never accumulate interest and unsubsidized loans do. A subsidy is basically a gift from the government.
Crozier recommended consolidating loans into a single payment so one check would cover all loans. Consolidating debts is like taking out a new loan at the current interest rate. Because prime interest rates are at a 40-year low of 1.25 percent, substantially below the rate of 5.5 percent at which most current seniors took out college loans their freshman year, students should consolidate now to get reduced rates. The prime interest rate is the lowest possible rate at which the government will allow money to be borrowed. When student loans are taken out, the borrower is charged prime interest plus a certain bank-determined percentage.
Crozier said students can only consolidate loans once, so they should take advantage of interest rates that, most likely, will not decrease any time soon. According to CNN, the prime rate has dropped steadily since March 2001. Loans taken out between then and now are being charged a higher interest rate than those taken out or consolidated today.
"Don't default on those government loans. Nothing will hurt your credit faster," said Nathan Crozier, a senior student financial assistance counselor with GW Student Financial Aid.
"I just hope I get a job that'll pay for (school) pretty quickly ... I know I'll be working my way through law school," said junior Andrew Dubinsky. "Tuition's part of (my financial problems). I mean, why am I paying more for GW than for Princeton or Harvard?"
There are two types of loans students will have to pay back. Subsidized loans never accumulate interest and unsubsidized loans do. A subsidy is basically a gift from the government.
Crozier recommended consolidating loans into a single payment so one check would cover all loans. Consolidating debts is like taking out a new loan at the current interest rate. Because prime interest rates are at a 40-year low of 1.25 percent, substantially below the rate of 5.5 percent at which most current seniors took out college loans their freshman year, students should consolidate now to get reduced rates. The prime interest rate is the lowest possible rate at which the government will allow money to be borrowed. When student loans are taken out, the borrower is charged prime interest plus a certain bank-determined percentage.
Crozier said students can only consolidate loans once, so they should take advantage of interest rates that, most likely, will not decrease any time soon. According to CNN, the prime rate has dropped steadily since March 2001. Loans taken out between then and now are being charged a higher interest rate than those taken out or consolidated today.
