Interest on federal student loans will begin accruing for borrowers in New York and across the nation starting this month. The Education Data Initiative finds $93 billion in federal student loan debt belongs to New Yorkers. The average amount of debt is almost $38,000 among the almost 2.5 million student borrowers in the state.
Brian Walsh, director of advice and planning with the personal finance company SoFi, said the new students should consider the return they receive on education before taking on student loan debt.
“At the end of the day, the loans are going to have to be paid back, and you want to make sure that you borrow enough money in order to get an education and further your earning power, and improve your quality of life, and things like that,” he said. “But, you don’t want to borrow too much money where it’s going to negatively affect major aspects of your life.”
Some of these major events could be buying a house, getting married and having kids. Walsh advised people be proactive about their repayments and check with their loan servicer to see when repayments begin in October.
As so many people prepare to repay their student loans, Walsh noted there could be challenges such as high inflation and interest rates that have stretched people’s finances. Focusing solely on the monthly payment is a common mistake people make when repaying their loans, he said.
“Current monthly payments are important because they need to fit into your monthly budget. But, when it comes to loans, it’s really a tradeoff between what you pay now and the amount you pay over the lifetime of the loan. So, you need to kind of go into that with eyes wide open that a lower payment isn’t always going to be best for you,” Walsh explained.
He said the interest rate will have a big impact on the cost of borrowing. A higher interest rate could mean paying back more money than initially borrowed. But, he added with federal student loans, the interest rate is set based on the type of loan and when it was taken.
Edwin is a reporter and producer in North Tonawanda, New York. He’s previously reported for the Niagara Gazette and the Ithaca Times. Edwin got an early start in radio interning for WBFO-88.7FM, NPR’s Buffalo affiliate. In 2018, he graduated from SUNY Buffalo State College with a B.A. in Journalism, and in 2022, graduated from Syracuse University with an M.S. in Communications.