Student loan interest rates keep rising
Students protest rising student loan debt for higher education and rally for tuition-free public colleges in New York
Cem Ozdel | Anadolu Agency | Getty Images
When it comes to university, tuition fees are increasing, as are the interest rates on loans to cover the bill.
Earlier this month, interest rates increased on new federal loans for the coming year. For new loans disbursed from July 1, 2017 to June 30, 2018, undergraduates will pay 4.45%. This is an increase from this year’s rate of 3.76 percent.
And the market for private student loans, which is already a more expensive way to borrow, is also on the rise. Both variable and fixed interest rates on private student loans have increased by almost a point compared to last year, according to a recent report from LendEDU, an online marketplace for student loans and student loan refinancing.
The average variable rate on a private student loan is now 7.81%, while the average fixed rate stands at 9.66%, LendEDU said. (See table below.)
“Students are put in a difficult position,” said Michael Brown, research analyst at LendEDU. “With tuition fees continuing to rise, federal loans will not reduce it, so some are forced to take out private student loans, where interest rates are high right now.” (Tuition fees have historically increased by around 3-5% per year, depending on the College Council.)
While most student borrowers rely on federal student loans, more than 1.4 million students a year use private student loan debt to bridge the gap between the cost of college education and their financial aid and savings, LendEDU said. The site based its findings on 80,000 users who inquired about private lending in the past year.
The main concern that parents and students said they share now – at all levels – is the amount of debt they are about to incur to pay for a degree, according to a separate report from The Princeton Review. Compare that to ten years ago, when the most frequently cited response was to not go to their first choice school.
According to LendEDU, about 60% of graduates leave college with some student debt, due to an average of $ 28,400 per borrower.
In total, total student debt in the United States exceeds $ 1.4 trillion (including more than $ 165 billion in private student debt), making it the second most important expense an individual is likely to make. in his life, right after buying a house.