AUSTIN, Texas — The Biden administration has approved $26 billion in student loan forgiveness. But high inflation rates are becoming another added expense when it comes to college tuition costs.
Inflation is affecting many Americans. From buying groceries to paying high gas prices, everyone has had to adjust. But inflation can also take a toll on college students who don't really have an income to begin with.
College comes with a lot of extra costs. College financial expert Jennifer Finetti said one challenge families could be facing due to high inflation is having less money to support their students.
Families may have tried budgeting six months to a year ago, but now because everyone is paying more for everything else, money is tight. If you take out a student loan, that can factor into an additional cost.
Finetti said the way student loans work is the rate students pay in interest is set on July 1 of the year that they'll be taking out a loan.
The interest rates for new undergraduate student loans are set to increase by nearly 5% this year, up from a little over 3% last year and 2.75% in 2020 to 2021.
The current loans taken out for this upcoming school year for undergraduates are at a rate of 4.99%. For grad students, it's 6.54%. And for parent-plus loans, which are loans that parents take out if they choose, it's 7.54%
Experts say the best things students can do is increase their income and reduce their expenses.
"For example, if there was a loan taken out five years ago and let's say at the time the loan was 4%, it's still going to stay that way. So, at least those rates will not be increasing just because everything else is increasing. But, of course, when all of your other costs increase, you have less money to spend on your student loan payments," Finetti said.
Ways to get a little extra cash includes getting a full-time job over the summer and during the school year. Students should try to work at least 10 to 15 hours a week. Experts also recommend students to start their classes before buying their books.
"Colleges know about the rising cost of tuition and textbooks, so many colleges are now encouraging professors to reduce relying on books. Renting books instead of buying is also a cheaper option," Finetti said.
In November 2019, the University of Texas at Austin approved a 2.6% increase for undergraduate students at all of its campuses for the next two years. The reason was to match the 2.6% inflation rate at the time.
UT said those tuition rates will stay the same for this upcoming year.
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