The article discusses how on average, student loan rates have dropped by over a third since their peak in 2015. The rate of inflation and risk to the borrower has decreased too. It looks like lower interest rates are here to stay for now!
What is a student loan?
Student loan rates are lower than average after the passage of the Obama administration’s 2014 federal student loan rate reduction. This is because the government only subsidizes loans for students with a certain level of income to make the education affordable. The low rates have made it possible for millions of students to attend college without incurring massive debt, which can be incredibly difficult to pay back if it’s not paid off early in life.
Student loans can be used to pay for college and are issued by a loan provider, such as the federal government. The interest rate on these loans is determined by the U.S. Department of Education, so it is usually 3 percent or less.
Six ways student loan rates have gone down over the past year
The U.S. student loan rate has gone down more than 1% over the past year, meaning that it is now at its lowest level ever, according to The Wall Street Journal. The rates have dropped steadily since 2010 when they first hit an all-time high of 7%. Thanks to the recent decreases in rates, many student loan borrowers will be able to lower their monthly payments as well.
When you factor in the current low interest rates on student loans, it can make college even more affordable.
The Federal Reserve is also lowering its benchmark interest rate to an all-time low of 0.25%. This means that if you have a student loan, your chances of paying back your loan are much lower than they were just a year ago.
What are the benefits of low interest rates?
Low interest rates encourage savings, which is great for you and your bank account. Plus, low interest rates incentivize Americans to live within their means and pay off their loans faster.
Interest rates are on the decline, but not everyone is lucky enough to get the low rates that student loans offer. If you are a borrower, look at these six benefits of low student loan rates before turning to a cash advance or private lender for help.
Low student loan interest rates: Good or bad for students?
The student loan rate is nearly always at or near the lowest in history. This has a lot of people talking about whether or not this is good for students. Supporters say that low rates will help students graduate with minimal debt. Critics argue that these rates are preventing students from receiving a quality education and limiting their access to educational opportunities like internships and scholarships.
Students who take out loans and graduate with a degree are now required to repay their debt. As the cost of college tuition continues to rise, student loan interest rates have remained remarkably low.
Students who take out loans (particularly government loans) will be protected by federal law after they graduate – meaning that they can’t be charged any more than the rates indicated on their loan documents. Whether this is good or bad is up for debate. Economists tend to argue that lower rates will ultimately push up the demand for degrees as a result of making it easier for students to repay their student loans if not earn a higher salary in the future.
The average interest rate for student loans in the United States is 3.7%, which means many students are paying less than 1%. However, this is not always the case with all federal programs and some private banks can have rates as high as 12%.
It’s not too late to take advantage of the low student loan rates. The best time to save is now!