Ask the average college student in America whether or not they have student loans, and the answer you get is most likely going to be yes. An approximate 70% of college students in America take out some sort of loan to help pay their way through school. A large number of these loans are federal, provided to college students by the government at a variety of different of different interest rates. These federal loans are typically provided at a rate much less than that of a bank. However, the rates for these loans are about to go up. According to CNBC:
Though federal student loan rates are fixed for the life of the loan, these rates reset for new borrowers every July 1, thanks to legislation that ties the rates to the performance of the financial markets.
The interest rate on federal Stafford loans will go from its current fixed rate of just under 4 percent to 4.66 percent for loans that are distributed between July 1 and June 30, 2015.
For graduate students, the rate on Stafford loans will rise from just over 5 percent to 6.21 percent.
Direct PLUS Loans for graduates and parents are still the most expensive, with rates rising to 7.21 percent.
The increase in monthly federal student loan payments can add up quickly, but shouldn’t be too burdensome for most students. For every $10,000 in loans, new borrowers will pay about $4 more a month based on a 10-year repayment period.
This increase in rate will mean that the bottom-line cost of college will rise. Though the article above points out that the rate increase does not appear to be too burdensome for most, it fails to address that for those prospective college students who already are concerned about their finances the increase will more than likely be felt. While this raise in interest rates does not affect students currently in school, it is important for consumers who are entering college (or who have family members doing so) to know that federal loans will be more expensive following July 1. As stated, this means that the cost of college will increase, as students will now have to pay more for their loans.
Read More- “Think college is expensive now? Wait until July 1” (Sharon Epperson, CNBC)