If you have any federal student loans, you should know July is an important time of year as it is the deadline for Congress to decide whether to extend the low 3.4% rate. Years in the past yes; this year no. For now…?
The Washington Post article on the topic outlines the typical behavior of Congress, which is to let measures expire and THEN consider looking into restoring them. In this case, it would have to get restored pretty quickly to be effective because students will be taking out loans for the academic year probably by around next month.
But what intrigued me was the Consumerist headline that states “Lawmakers Letting Stafford Loan Interest Rate Double, but Don’t Freak Out Just Yet.” Don’t freak out? I don’t know much about the Consumerist, except that it appears to be for the “consumer” and against whomever is not the consumer. But I don’t see what value there is in telling consumers of debt that interest rates are going up but everything will be ok based on technicalities associated with the rate increase. I don’t see how there is a “not a problem” outcome for debtors regardless of rate hike.
I would love for a headline to say “Student loan rates doubled, and might revert, but maybe not so this is an excellent time to motivate yourself to get serious and create immunity from this federal government nonsense in the future!” It frustrates me that people react to student loan bad news with fear or crankiness (as if the federal government forced all of us to take these loans). Loans are tough, but this should be a motivation to shore up and pay down. You know, plain old stop drinking lattes, no more manicures, maybe even give up on haircuts for a while and go au naturale. No more magazines, no more dining outside the home, and no more credit cards. Just live on $500 cash per month for a while until you liberate yourself from the student loan boa constrictor that has wrapped itself comfortably around your neck.
I am currently paying down my last federal loan, and that bad boy is today at $7,607. At 4.12%. I spent last August through this March paying down another federal loan whose balance was $15,800 when I started on it in August. It was at 5.8%. So I’m not sure where these articles are getting “3.4%” from. Maybe because my loans were consolidated, or maybe because there is fine print that the 3.4% is the income-based baseline. My loan rates were even higher than this figure the media outlets are urging us to cling to, and I, a person of average-to-spacegirl financial sensibilities, still brought out a can of whoopass upon all these loans. It’s called: stock up on ramen noodles and sit home reading books, broke person.
I know I’m a total Debbie Downer here, but debt annihilation comes from self-control, not self-pity. If the legislators raise rates at our cost to serve the needs of the government, it’s especially time to fight back, not give in or “freak out.” That is too vulnerable a position for my taste. And let’s get real: fighting back is shifting the power back to your corner by paying off, not by whining. It doesn’t look like the Occupy Whatever Whiners have accomplished anything so far. I think it’s fair to say that governments to varying levels will try to tax everything of ours, so just don’t let student loans be one of them. Not putting yourself in a position to need to take them out in the first place also counts.
So maybe this is a time to celebrate the Congressional wake-up call that can give us the gift of self-awareness and motivation, if we are willing to see it. Killing the snake and enjoying all of your proverbial oxygen is a much better way of life.