Student loan borrowing is starting to get more expensive as the Federal Reserve’s move last month to raise interest rates is starting to increase the rates student loan lenders are offering on some of their products.
Take CommonBond, the student loan lender out of New York. While it kept its low fixed student loan refinancing rates at 3.37 percent, CommonBond reduced the upper end to 6.74 percent from March to April. Despite this move, it raised the interest rate it charges on variable rate loan refinancing. Variable rate loans change based on the prevailing interest rate. Last month, it was expected that variable rate student loan costs would start to tick up. As of April 1, the CommonBond student loan refinancing interest rates were between 2.56 and 6.48 percent which is up from March’s range of 2.32 and 6.18 percent according to LendEDU.
CommonBond isn’t the only student loan lender to raise rates on their variable loans at the start of April. Both Earnest and SoFi have upped the rates on their variable loan products as well. Take Earnest for example, variable loan rates range from 2.75 percent to 6.23 percent in April according to LendEDU. The previous month, the variable rates on these loans were between 2.55 and 6.03 percent. Fixed rate loans were stagnant from March to April, residing between 3.75 and 6.64 percent. Meanwhile SoFi, one of the nation’s largest fintech companies, raised the rate on its variable loans to between 2.565 percent and 6.490 percent as of April 1st. That compares to between 2.365 percent and 6.29 percent interest in March.
In mid-March the Federal Reserve bumped up the benchmark rate by 0.25 percent, and the government agency is signaling more increases in 2017. The Fed raises interest rates when the economy is doing well which is good for everyone even if there is a slight uptick in the cost of borrowing. “The simple message is the economy’s doing well,” said Federal Reserve Chair Janet Yellen, “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.”
Author: Donna Fuscaldo
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