Current Interest Rates On Student Loans

You have to take a loan out at some point in time if you want to go to college–and it’s highly likely you’ll end up needing to borrow money later on anyway. So now’s a good time to figure out how much interest you’re going to pay on those loans.

A lot of people don’t realize that federal student loans aren’t free money; they actually cost interest. There are several different types of these loans, each with its own rate. Here’s what you need to know about how much interest you could be paying on your federal student loans.

Federal Stafford Loans – These are the best type of federal student loan. They come from the government, they’ve got low rates (currently 4.29% APR), and they come with generous repayment terms. But here’s where things get tricky. Because the amount you borrow depends on the value of your family home, and because property values fluctuate, the actual monthly payment you have to make may change over time. That’s where private lenders come in.

Private Student Loans – If you borrow money privately, then you’re opening yourself up to greater risk than you would if you took a loan directly from the U.S. Department of Education. Not only do you not receive any kind of financial help from Uncle Sam, but your payments aren’t guaranteed either. You’ll also probably have to pay higher interest rates. But if you really need cash right away, this option might be worth exploring.

Income Based Repayment – As long as you keep making payments and remain employed, you won’t ever have to worry about repaying your federal student loans. But once you graduate from school, your loan balance starts getting amortized, which means it gets broken down into smaller chunks, and your monthly payments increase accordingly. The idea behind this approach is that you should never be forced to pay back more than you earn.

Paying Off Your Loan Early – When you start repaying your student loans, it’s smart to get them paid off as soon as possible. Why? Well, first of all, it gives you more flexibility in planning your finances. Secondly, the longer you leave your loans unpaid, the more interest you accrue. And finally, the earlier you pay back your loans, the less chance you have of being hit with unexpected fees.

Current Interest Rates On Student Loans

Direct Subsidized Loans – For students who were not previously enrolled in any Direct Unsubsidized Loan program, the interest rate is currently 6.31%.

Direct Unsubsidized Loans – For current borrowers, the interest rate is 5.41%

Parent PLUS loans (formerly known as Federal Family Education Loan) – For current parents, the interest rate is variable but can range between 4.29% to 8.74%, depending on their creditworthiness.

Parent Private Loans – For current parents, this type of loan comes in at 6.78%.

Federal Perkins Loans – For those who plan to attend college after high school, these loans require students to complete at least two years of post-secondary education before they can begin repayment. The interest rate is variable and ranges from 7.21% to 12.71%.

Stafford Loans – These are subsidized student loans that are offered to undergraduate students who have graduated from high school or intend to pursue further education beyond high school. The interest rate is fixed and varies between 2.84% to 7.21%.

William D. Ford Direct Loan Program – This federal direct loan program offers low-interest rates and flexible repayment options to borrowers who are pursuing higher education. The interest rate is set at 3.86%.

Public Service Loan Forgiveness – Borrowers may qualify for public service loan forgiveness if they work for certain organizations. In return, they agree to work in public service jobs for 10 years after graduation or while paying back their loan. This program is only applicable to borrowers who received a Direct Consolidation Loan.

Income Based Repayment – This type of loan requires borrowers to pay a lower monthly payment based on their income. However, borrowers must make payments for 20 years before they can start making smaller monthly payments.

Graduated Repayment Plan – This plan is similar to standard repayment plans except that the borrower’s minimum payment begins gradually increasing until it becomes equal to the amount he or she would normally repay per month.

Pay As You Earn – This option allows borrowers to set up a repayment schedule based on how much money they earn each year. Unlike other repayment programs, borrowers do not need perfect credit to qualify for PAYE.

Standard Repayment Plan – These types of loans feature a fixed monthly payment amount for the entire term of the loan. At the end of the loan period, borrowers may either choose to pay off the debt completely or roll over the remaining balance onto a new loan.

Extended Repayment Plans – This option allows borrowers who wish to take longer to eliminate their student loan debt to do so. There are three different extended repayment plans: extended principal reduction, extended grace period, and extended graduate repayment. Each plan differs slightly. Students should compare each plan carefully before selecting one.

Paying Off Student Loans Early – By choosing to pay off their student loan early, borrowers can save money on interest charges. Depending on what type of loan they took out, they could owe more than $100,000 in interest charges. After five years, borrowers are allowed to refinance their student loans at a lower rate.

Current Interest Rates On Student Loans

Interest rates have been rising steadily since the 2008 financial crisis, and they continue to rise today. Here’s how interest rates affect student loan borrowers.

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Current Interest Rates On Student Loans

Interest rates on student loans have been at historic lows over the past few years – not just for federal loan programs, but also for private lenders. Today, we’ll talk about what interest rate changes could mean for students, and how they might affect the types of loans that are best suited for their needs. We’ll also discuss some potential scenarios that may occur if interest rates do begin to rise again.

Student Loan Interest Rate Changes Since 2010

Federal student loan interest rates began rising sharply after 2007. In 2006, the interest rate on the Stafford loan was fixed at 4.74 percent, while the interest rate on PLUS loans was 5.31 percent. In 2007, both interest rates rose to 6.21 percent, though they declined back down to 4.74 percent (for the Stafford loan) and 5.31 percent (for the PLUS loan). But then, in January 2009, the interest rate on Stafford loans jumped to 6.21 percent and stayed there until July 2011. That means that the average student who took out a loan between 2007 and 2011 had to pay an extra $1,965 in interest payments in those five years.

In June 2011, the interest rate on PLUS and Perkins loans went up to 6.21 percent. Then, in March 2013, the interest rate on subsidized Stafford loans increased to 5.55 percent. At that time, the interest rate on unsubsidized Stafford loans remained unchanged at its previous level of 6.21 percent. A couple of months later, the interest rate on Federal Family Education Loan (FFEL) and William D. Ford Direct Subsidized Loan (Direct) programs increased to 5.84 percent. However, the interest rate on FFEL/Direct Unsubsidized loans actually decreased to 5.68 percent. And finally, in October 2014, the interest rate on all federally backed loans (except for the Direct program) decreased to 3.86 percent, after remaining at 5.84 percent since April 2012. Thus, between September 2010 and October 2014, the interest rates on federal student loans dropped from 8.41 percent to 3.86 percent.

What Does All Of This Mean?

The fact that interest rates on federally backed student loans have fallen dramatically over the past several years has many people wondering whether now is a good time for them to take out a loan. After all, if interest rates continue to decline, borrowers should save money by borrowing less than they would have otherwise.

But there are two problems with this thinking. First, the drop in interest rates has been quite dramatic – especially in comparison to the drop in inflation. According to the Bureau of Labor Statistics, consumer prices rose.1 percent year-over-year in November 2015, compared to 2.5 percent in December 2000. Meanwhile, the interest rate on federal student loans plummeted from 12.10 percent in December 2000 to 3.86 percent in October 2014. So even though interest rates on these loans fell by nearly 40 percent over the course of 15 years, the price level has risen more than twice as much.

And second, even if current interest rates remain low, future ones could increase significantly. If interest rates start rising again soon, borrowers could end up paying higher interest rates than they did before the recent period of low interest rates. If interest rates are high enough, they could make unsubsidized loans prohibitively expensive for most students.

Types Of Student Loans Best Suited To Your Needs

A lot of factors determine what type of student loan is right for you, including your credit history, need for financing, repayment options, financial aid, and family situation. Let’s examine each of these issues in turn.

Whether You Should Take Out Private Or Public Loans

Private student loans tend to charge lower interest rates than public ones. And since private loans are issued directly by banks and other lending institutions, there isn’t any involvement from the government. However, private loans often carry higher fees than public ones. Additionally, private loans aren’t eligible for subsidies under the Federal Family Education Loan Program, which means that they don’t offer certain protections that students using federal loans receive. Finally, private loans generally require collateral and/or proof of income, making them harder to qualify for than federal loans.

On the other hand, public loans come with no origination fees, can be used for almost anything, and are eligible for federal education subsidies. Moreover, although public loans aren’t available for everyone, they are available for virtually anyone with an FAFSA. As long as you meet all eligibility requirements, you can borrow a significant amount of money without having to put up any collateral or provide proof of income.

However, the biggest downside to public loans is that they generally require that you have excellent credit. Even if you have bad credit, you still might be able to get approved for a loan. But if you have poor credit, the chances of getting approved will decrease substantially.

Current Interest Rates On Student Loans

Why Are Student Loan Interest Rates So High?

Student loan interest rates have been skyrocketing over the years. When President Obama took office in 2009, federal student loan interest rates were set at 5.9%. Today they are currently set to 6.21%, and if current trends continue, they will go higher than 10% by the end of 2018. At the same time, banks have been reporting record profits, despite the fact that many people still cannot find jobs. These two factors combined mean that student loans are becoming more difficult to pay back, increasing financial hardship for students who need them to pursue their dreams.

How Can I Pay Off My Student Loans Faster?

The best way to pay off your student loans faster is to apply for public service jobs with the Federal Government. You can contribute to your country’s success by taking care of its infrastructure and education system. To begin, you can search online by going to www.studentaid.gov/public-service and fill out the application under the Public Service Opportunities link. Once you do that, you’ll receive a job description and details about how to get started. In addition, you should consider applying to local government positions if you live near a city or county where these types of opportunities exist. If you don’t already work for a company that provides financial services, it might be a good idea to start looking into getting hired by one.

What Is A Direct Loan And An Alternative Loan Program?

A direct loan program is a type of loan program run directly by the Department of Education (DOE). Students may choose a direct loan program based on their financial situations and goals. Most direct loan programs offer low monthly payments and long repayment terms. However, these loan options limit borrowers’ choices and make it harder to achieve their personal financial goals. As a result, some students may prefer alternative loan programs instead.

Alternative loan options allow students to borrow federal money without being bound to specific repayment plans. Alternative loan programs give borrowers more freedom to customize their own repayment schedules and select flexible payment options. Alternative loans may not have lower monthly payments and longer repayment terms compared to direct loans. Instead, alternative loans generally have higher interest rates. Nevertheless, borrowers usually enjoy more flexibility and control over their finances, making them ideal alternatives to direct loans.

When Will I Be Able To Find Out How Much Money I Owe?

One of the biggest barriers to paying off student debt is knowing what exactly you owe. When you sign up for a student loan, the lender takes on the responsibility to track your account and inform you of any changes to your balance. After graduation, you will likely receive bills from lenders each month. If you aren’t sure whether you’ve paid off all your student loans, contact your lender to find out. Your lender will be able to provide detailed information regarding your outstanding balances, including the amount you owe and the interest rate applied.

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