As if the cost of a college education isn’t expensive enough, university-bound students face an uptick in the interest rates on their student loans for the coming academic year of 2017-2018.
That’s because in July the interest rates on newly issued federal loans for the 2017-2018 school year are going to increase. According to a report in CNBC, student loan borrowers will face interest rates of 4.45 percent on federal student loans which is up from the current rate of 3.76 percent. What’s more, CNBC reported that graduate students will also have to pay more for their student loans as of July 1. Their standard rate will go up to 6 percent for a direct unsubsidized loan which is higher than the 5.31 percent that graduate students pay on their loans. Parents aren’t out of the woods either. The rate on a direct PLUS loan for both undergraduates and graduate students will increase to 7 percent from 6.31 percent.
Borrowers of federal student loans aren’t the only ones who are likely to pay more to bankroll their college education. Private student loan borrowers can expect rising interest rates, particularly those with variable rate loans. In mid-March, the Fed increased interest rates by 0.25 percent and signaled two or more interest rate increases in 2017. This move on the part of the Fed drives private lenders to follow suit. While it may seem undesirable, it is technically a good sign for the nation overall, one currently struggling with a student debt load that exceeds $1.4 trillion.
“The simple message is the economy’s doing well,” Federal Reserve Chair Janet Yellen said at the time. “It’s performed well over the last several years. The unemployment rate has moved way down, and many more people feel optimistic about their prospects.” The Fed is also forecasting another rate hike in 2018 if the economy continues on its current trajectory. That move on the part of the Fed has resulted in private student loan lenders including SoFi, CommonBond, and Earnest to increase the interest rate on their student loans. Borrowers in existing fixed interest rate loans are protected from the rate hike, but the same isn’t true for those opening a new student loan for the 2017/2018 school year.
Author: Andrew Rombach
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