Citizens Bank recently announced that all federal student loan interest rates would be increased by nearly 70 percent beginning this fall, making this the first raise in more than four years.
The popular Federal Stafford Loan saw an increase last Friday from 2.77 percent to 4.7 percent and rates for Parental Loans for Undergraduate Students or Plus Loans will be increased from 4.17 to 6.1 percent.
"The subsidized Stafford Loan is still a great deal," said Karen Smith, financial aid counselor. "The interest rate does not start accruing until six months after students graduate or drop below half-time enrollment."
Great deal or not, if students did not consolidate their student loans into a fixed rate before last Friday's deadline, they may be losing a substantial amount in interest charges.
After the July 1 deadline, students would be expected to pay around $5,800 in interest charges on a $20,000 Stafford loan paid on a 10-year plan.
Before the interest hike, students would only be expected to pay around $3,500 for the same loan.
Freshman biology major Lauren McKnight said the interest rate raise on loans will make it even harder to pay tuition, which is also on the rise.
"Higher tuition and higher rates means higher costs," McKnight said. "I guess there is nothing we can do about it."
Many students aware of the impending interest rates took advantage and consolidated their loans at a fixed rate.
"I would have recommended consolidating to all students," said Nick Green, National Student Loan Data System counselor. "Students could have saved thousands by simply locking in at the lower interest rates."
That is advice McKnight said she never received.
"I guess we have to find out in The Helmsman that we all got taken for a lot of money because we didn't know any better," McKnight said.
Several states including Kentucky sent emails to all publicly enrolled college students informing them of the hike.
While it is too late to take advantage of the old lower interest rates, students can still consolidate now and protect themselves from further hikes.
"It is still a good idea to consolidate now into the current raised interest rate. Lots of different economical events affect their increase and decrease. You never know if they could rise again."
Student loan interest rates are specifically based on the rate of Treasury Bills. Treasury Bills have seen sharp decline over the past four years, however recently they have started to rise.
Even though finance charges maybe a little higher than most students liking, Stafford loans are still one of the best ways to go to pay for school, said Smith.
"Subsidized and unsubsidized Stafford loans are still a great loan program even at 4.7 percent," Smith said. "If students try get private loans through lending institutions, the interest rates are usually higher."
