Student Loan Interest Rate Hike, Perspective

Great news! (I think)

College students and those with a higher education in the cards cheered the measure passed by Congress

last week. This bill eases worries that interest rates on Stafford loans would double from 3.4 percent to 6.8 percent, yet the caps on interest rates in the future are actually higher (8 percent) than the highest mark on the table.

In fact, many believe the deal could end up being worse for students in the long term. The best news is for students taking out loans this year. Fixed rates of 3.9 percent for undergrads and 5.4 percent for graduate students would be set for the entire life of the loan.

Interest rates moving forward will be based upon the 10-year Treasury note. Students now will benefit, but as interest rates rise (a guarantee), the students of tomorrow will be saddled with the bill. Would a 6.8 percent interest rate on Stafford loans have been the best solution for students in the present and future? Some observers believe the mark would have been better for the future of education if this unrealistically low mark (3.4 percent) were doubled, as that would still fend off the possibility of an even higher rate (8 percent) becoming the new normal for students paying back debt.

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About defaultprevention

Default Prevention Specialist since 1998.
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