Don't Waste Your Money: Student loan time bomb ticks away - News, Weather, Sports, Toledo, OH

Don't Waste Your Money: Student loan time bomb ticks away

(WTOL) - For anyone with a student loan or looking to take out a student loan, you may soon have to pay more on that loan every month. It is called the "Student Loan Time Bomb."

Millions of college students and graduates will be forced to pay higher rates on their loans in a few months. If you have children who are not yet in college, you can avoid some of this trouble by planning ahead.

The amount of student loan debt many young people are taking on now is shocking.

Maggie Cobb said college loans are adding stress.

"The chances of getting a job straight out of college to pay for that is getting slimmer and slimmer now, so it's a lot more stress to put on yourself," explained Cobb.

Life is about to get more stressful this summer. Unless Congress acts, federal student loan rates will double on July 1 from their recession-reduced 3.4 percent to 6.8 percent.

It is something these students are not looking forward to facing.

"I think I have close to $8,000 in loans this semester, and next semester will be even more taking summer classes," said college student Ryan Gnessin.

If you are a parent with children not yet in college, experts said this student loan time bomb should be a warning. They suggest saving as much as you can now in a state 529 plan, rather than paying later with interest charges.

"Every dollar saved is one less dollar that has to be borrowed ultimately," said Coordinator Paul Paeglis.

Plus, the money in a 529 plan is deductible on state income taxes, plus the interest and growth do not get taxed. It is a great way to avoid the college loan trap.

It is almost impossible to discharge college loan debt through bankruptcy. If you are uncomfortable with the size of the college loan you will need, you may want to consider a cheaper public school, or start with a two-year community college. That way you don't waste your money.  

Copyright 2012 WTOL. All rights reserved.

Powered by Frankly