Interest rates on Stafford loans for students in school and the workforce fell to all-time lows in July, with the rate for students in school and in their grace period shrinking to 3.46 percent.
The grace period is defined as six months after a student graduates college. For those falling outside the confines of the grace period, the rate is 4.06 percent.
Two years ago, the rate was 8.19 percent.
“I took my loan out at 7 percent,” said Mike Roddick, a kindergarten principal. “I’m still paying off my undergraduate loans — and then there’s my master’s.”
Now, Roddick, a father of two in his mid-30s and married to another loaner, could save thousands by consolidating his undergraduate and master’s loans into one loan at 4.06 percent.
Many lenders will agree to lower the rate another percentage point for students who complete 48 consecutive months of payments.
Three percent could save Roddick $300 for every $10,000 in student loans invested. Multiply that across the family, and the savings could be enormous.
The 1998 report of the National Commission on the Cost of Higher Education found that between 1976 and 1996, the average tuition at public universities increased from $642 to $3151. The same report found tuition at private universities had risen from $2,881 to $15,581 in the same period.
The average tuition at public institutions is now $3,510, while at private institutions, the average is $15,518. The skyrocketing tuition has left graduates average debts of $17,000.
A 1971 memo from the executive director of business at University of Wisconsin-Whitewater listed tuition at $247.50 as the cost for 12 or more credits. Today, 12 or more credits at Whitewater will cost $3375, an increase of 1,263 percent.
It was once possible to pay off an entire year of tuition by working for one summer. Now, a student attending UW-Madison would have to work 104 straight eight-hour days starting May 20 and ending Sept. 1 while clearing more than $16 an hour after taxes to fully fund the school’s estimated average cost for an academic year. That cost for in-state students is $13,340.
The rising tuition, matched with sluggish wage increases over the past 25 years, has created a college environment where the words “Stafford” and “Perkins” are as commonplace as “midterm” and “landlord.” During the 2000-01 school year, the UW-Madison Bursar’s Office distributed 15,188 loans totaling $16,611,598.42. Nationally, some 16 million people owe nearly $250 billion in student loans.
During the 2000-01 school year, the UW Office of Student Financial Services reported student debt was leveling off. Whether this was in part due to lowering interest rates or increasing credit card debt among college students is not yet known.
