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This video shows how to calculate interest rates on student loans using the Wells Fargo calculator. You’ll learn how to enter your loan information, how to find the current rate of interest, how to use the payment planner and how to calculate future payments.
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Wells Fargo Student Loans Rate
Student loans are a necessary evil for higher education. Most students’ first instinct after receiving financial aid is to use the money to cover tuition dollars, not pay down student loan debt. In fact, some estimates show 70 percent of college graduates carry undergraduate loan loads. However, paying off student loan debt does have its rewards, especially if you make payments on time. Here’s how much interest you’ll pay on various types of federal student loans. news
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Wells Fargo Student Loans Rate
In early 2016, the largest bank in America, Wells Fargo, announced a student loan rate hike. This was not a good news for students who were depending on their loans. In addition to increasing rates, they also added more fees to some accounts. These changes came after Congress passed the Higher Education Act of 1965, which allowed banks to make money off federal student loans. By raising interest rates at the beginning of 2016, Wells Fargo was able to profit off those students who had already taken out loans. According to Bloomberg, Wells Fargo loaned over $1 billion in federal student loans in 2015 alone. However, Wells Fargo increased their rates only about 0.25 percent.
Private lenders have been known to charge even higher interest rates than Wells Fargo. In 2015, private lender Sallie Mae raised its rates on federal student loans by over 10 percent. Their initial increase was set at 5.9 percent, but then they bumped it to 11.9 percent shortly afterward. There was no explanation given for these increases, but many people speculated that they did it to get rid of their competition.
The federal government does not have the same restrictions that private lenders do. Since the U.S. Department of Education is actually the owner of student loans, the department sets interest rates, caps payments at 8 percent annually, and offers various repayment plans. Students should keep in mind that the federal government offers lower interest rates compared to private lenders, but that comes with some restrictions.
Interest only loans
Students can choose between two types of federal loans: subsidized and unsubsidized. Subsidized loans offer low monthly payments while still providing enough funds to cover tuition costs. Unsubsidized loans require borrowers to pay back all the money borrowed regardless of how much they use them. If borrowers decide to take advantage of interest only loans, then they are agreeing to repay the loan with interest only. The amount of interest charged depends on the type of loan. Subsidized loans carry a fixed rate, while unsubsidized loans have a variable rate. Both rates tend to be higher than traditional loans.
If borrowers have other financial obligations besides student loans, then refinancing may be a possibility. Borrowers can refinance previous loans to lower their interest rates. Many institutions offer refinancing programs for existing loans, however, it is often hard for students to find one. Because of these high interest rates, many students opt to just borrow the maximum amount of money possible instead of paying less.
Wells Fargo Student Loans Rate
Annual Percentage Rates (APR)
APRs are calculated using a combination of a fixed rate and variable interest rates. APR is determined based on several factors that may change over time such as loan amount, type of loan, repayment duration, credit history, etc. When calculating the APR, Wells Fargo considers both fixed and variable components. The primary purpose of calculating APRs is to help lenders price loans appropriately and ensure borrowers have access to the best possible terms.
The term length refers to how long the borrower will need to make payments on their student loan (or any kind of loan). A standard term is between 10-25 years. Most loans will automatically renew after a certain period of time unless they are paid off before then. If the loan doesn’t renew, the interest rate might increase due to the increased risk of default.
Cost refers to the total amount that a borrower would pay each month for a loan. The monthly payment, including principal and interest, is not always the same amount every month. Instead, it changes depending on a variety of factors including the current interest rate, loan balance, and loan term. Costs vary widely across different types of loans.
Early Payment Penalty
Early payment penalties are charges levied if a borrower pays his/her loan back before its scheduled maturity date. In some cases, these penalties can be waived or reduced if a borrower makes a good-faith effort to repay their loan early. However, many states have laws in place restricting the amount of debt that can be forgiven.
Loan origination fees
Loan origination fees are charged at the beginning of a loan. These charges range from 0% to 5%, depending on the lender. Lenders charge origination fees to cover costs associated with processing applications.
Late fee amounts are set by the lender and vary depending on the state where the borrower resides. Typically, fees range anywhere from $10-$100 per late payment.
Other fees include those related to additional services such as collection agency fees. Collection agency fees range anywhere from $15-$50. Additionally, lenders may offer prepayment penalties. Prepaid penalties occur when borrowers decide to pay off their loans early. Penalties can be as low as 1%-9% depending on the loan.
Wells Fargo Student Loans Rate
Wells Fargo Student Loan Rates 2016-2017
These changes take effect August 1st, 2016.
Rates for 2016-17 school year:
(all rates below are per $100 monthly payment.)
Graduation Rate: 4.65%
Payment Option A (10 years): 5.25% – 6.50%
Payment Option B (15 years): 3.75% – 4.75%
Payment Option C (30 years): 2.75% – 3.00%
Payment Option D (Unlimited): 0.25% – 0.50%
The following chart shows how repayment options change over time based on various repayment lengths and interest rates.
For example, if you choose to pay off your loan at 10 years, the total amount paid would be $0.25 x 48 $12.00. If you were to make payments each month, you would have paid $48.00 and would owe 29 additional years. At the end of the 29th year, you would have repaid $12.00 x 49 $62.40 ($48 + $12). Your original principal balance is now only $63.60. So, with any remaining principal left on the loan, it’s like starting out with a fresh loan of just $63.60.
If you were to choose a 15-year plan, the total amount paid over this period of time would be $0.50 x 36 $18.00. You would then have paid $36.00 and would owe 27 additional years. At the beginning of the 27th year, you would still have outstanding $18.00 x 28 months $504.00 (your original principal balance plus accrued interest). At the end of the 27th year ($504), you would have already paid $18.00 x 30 months $540.00 ($504 + $540) into your loan. By paying off the entire loan early, you’ve essentially extended your repayment terms by 18 months. Your principal balance is now reduced to $270.80. So, even though you had to pay more money up front, you’re actually still saving money over the long term.
With the Unlimited Plan, you would pay a fixed rate of 0.25%, regardless of how much you borrowed. When you first borrow the money, you would pay $0.25 x 12 $3.00 for the first twelve payments. Then you’d pay $0.25 for the next 24 payments. And then every year after, until you repay your balance.
So, what does all this mean? All these different plans offer varying degrees of flexibility. If you want to maximize your savings, you’ll need to consider how much you’ll be able to afford to borrow and how much time you want to spend repaying.
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