Are Your Student Loans Citibank College Loans?
President Obama has worried more than a few students about their interest rate rising, due to the expiration of a law that sets the rate.
The trouble is, not all students with loans to major banks understand the problem, or how it affects them.
The law expiring will cause interest rates to jump, if it expires. The rate will double from 3.4 to 6.8%. That is a substantial jump!
Here’s the misunderstanding: if you have a loan from Sallie Mae, or Bank of America, or if you have Citibank college loans, you may not have any interest rate rise.
Why? Because you probably have private student loans, not student loans subsidized by the US government through the Dept of Education. There’s nothing wrong with either kind – they help thousands of people go to school and get a great career.
In terms of what will happen when the law expires, though, you should know that not all college loans will go up, only the government subsidized ones.
What Is Being Done?
And, even if you have the subsidized loans, the House has already sent a bill to the Senate to keep the interest rate down. It probably won’t be an issue – just a quick scare to get your heart rate up.
The Downside of Private Loans
Let’s say you’ve checked, and yes, you have Citibank college loans, or B of A, or Sallie Mae – whatever, you found out or remembered that they are private loans.
Another reason you won’t be affected by this rigamarole in Washington DC is that you probably have a higher interest rate already.
That’s the downside of a private loan – they don’t have the subsidy, so you pay more in interest.
What Can You Do
If you find yourself in this position with private loans and high interest rates, what can you do?
Here are a few ideas:
- If you get future loans, get subsidized ones if you can. (I know, obvious - you have probably thought of this already).- Pay off the Citibank college loans, Bank of America, Sallie Mae, and other private banks first. That will reduce your payment faster as well.- When you have extra funds available via subsidized loans, borrow the subsidized loan and payoff a private loan if possible.- Apply for as many scholarships as you can!
That’s just a few ideas that might help.
You can add to this list with other ideas for your situation. For example, if you have a job opportunity, maybe you should take it. Or if you have any major assets you can sell to cover your last tuition bills, it could save you some problems.
You can come up with more. Maybe a fellowship, an internship, or a different place to live that cuts down on expenses.
And student loans of all kinds, Citibank college loans or whatever they are, can be a heavy burden - pay them off as soon as possible.