Student loans aren’t just expensive for the 45 million Americans who are holding $1
The Federal Student Aid office, the largest provider of college financial aid, announced an interest rate increase of nearly a full percentage point will go into effect in July. That seems surprising when the Federal Reserve has kept interest rates near 0% ever since the onset of the pandemic recession . This week it said it will do so for years to come. So why is it different for student loans?
Insider spoke to student-loan expert Mark Kantrowitz, who has published five bestsellers on the best ways to pay for college and manage student loans. He currently runs privatestudentloans.guru, a free website about borrowing to pay for college, where he actually calculated the new student-loan interest rates before the Federal Student Aid office officially posted them to its website.
He explained that the rate increase has nothing to do with the benchmark interest rate or with the current pause on payments of student loans with no accumulation of interest – something President Joe Biden extended through September after he took office.
Interest rates on student loans reset each July 1 and last for a year, and they’re based on the ten-year Treasury note auction plus a certain margin depending on the type of student loan. Read more