Lowering interest rates on federal student loans is one of the many goals of student loan activists and lawmakers in the United States, but in Jamaica, it’s already becoming a reality.
Last week, the Student Loan Bureau (SLB) in Jamaica signed off on plans to lower the interest rates on student loans. Finance Minister Audley Shaw announced in an opening speech that the SLB will lower interest rates on Pay As You Study loans from 9.5 percent to 6 percent, and Post-graduate loans for students studying Maritime & Logistics, Engineering, Agriculture, and Information & Communications Technology will be lowered from 13 percent to 9.5 percent.
In his speech, Finance Minister Audley Shaw said that taking action to help the country’s young people is an imperative due to the “crucial importance of human development.” He continued, “we must continue to accelerate the pace of human development and training for our population…to increase productivity.”
College graduates in Jamaica may not owe as much as students in the U.S., but the interest they pay on government backed loans is much higher even – with the new reduced rate, explaining the Jamaican Finance Minister’s concern with human development. According to LendEDU, for the 2016/2017 school year, undergraduates in the U.S. are paying interest of 3.76 percent on subsidized and unsubsidized federal loans while graduate students pay 5.31 percent interest on unsubsidized graduate loans and 6.31 percent on a Direct Parent PLUS and Graduate Plus loans.
Student who turn to the private sector for student loans can expect to receive different rates. The interest rates on private undergraduate loans range from a low of 2.76 percent to as high as 12.99 percent, depending on the lender and other factors. On the graduate side, interest rates range from as low as 2.76 percent to a high of 12.99 percent. Parents taking out loans for their children can expect rates to range from 4.12 percent to 12.87 percent.
While the U.S. Government has no influence on private loan interest rates, Congress has displayed proactivity on federal interest rates in the past. In fact, college affordability, thus human development, is a hot topic in Congress according to LendEDU. Many politicians strive to keep interest rates low on federal loans in order to counter the effects of crippling student debt, just like Audley Shaw has done in Jamaica. All too often, it is mentioned that graduates delay saving for retirement and starting a family due to their loans.
Although student loan interest rates are by far the most popular college affordability topic discussed Congress, there are others that receive attention from U.S. congressmen and congresswomen. Pell Grants, free financial aid to low-income students, receive both support and opposition from Democrats and Republicans. Federal student loan refinancing is staunchly supported by Democrats and bitterly opposed by Republicans. Student loan forgiveness receives support from both sides of the party line, but overall, it is not heavily supported by any party. There are other less direct solutions such as improving financial literacy and the tax code on student lending and repayment, but these do not receive the same attention or significance as the other initiatives.
One thing is certain, both Jamaican and American officials want to help their students pay back student loans. Over 99 percent of 10,000 Jamaican student applicants receive financial aid from the Student Loan Bureau every year. In the U.S., there are over 40 million student borrowers. These are considerable portions of each country; luckily, government leaders seem to have lower interest rates as a top priority.
Author: Donna Fuscaldo
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