All you need to know about the surge in student loans
Last updated on May 12th, 2022 at 03:37 am
Interest rates on student loans are set to increase but not to the level they have been in the past.
On Tuesday, the US Treasury will announce decisions that will spike the interest rates on federal student loans. The Federal Reserve’s step to increase interest rates has already impacted private loans.
A sophomore at Georgia State, Madison Keys, borrowed money to attend college. However, she will need to borrow more to finish school.
“It’s only about $5,000 so far,” she said. “It’s going to be more by the time I graduate. I’m just trying not to think much about it.”
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It is pertinent to state that the rate on federal student loans is fixed and changes once or twice a year.
“It seems likely that the new interest rates will be a full percentage point higher, maybe one and a half percentage points higher,” said Mark Kantrowitz, an expert in student financial aid. “Probably near to $1,000 and that’s per $10,000 borrowed.”
Although the announcement on how much to spike the interest rate would be made by the end of this week, it won’t take effect until July 1. Students cannot borrow money for next year until then.
Kantrowitz said the price hike might seem discouraging in this era of high inflation, but there’s a silver lining.
“The interest rates are going to be low compared to past interest rates,” he said. “Student loans were as high as 6.8% at one point. On parent loans, they were as high as 8.5%.”
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As per the National Center for Education Statistics, the cost of going to a public university has surged by about 13% over the past decade.
Meanwhile, Keys has scholarships with the loans she will have to pay back.
“Hopefully I will get a job that allows me to pay back relatively quickly,” she added.
