Student Loan Deal Passes Senate Inclusive of Grad Loans

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Archangel
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Student Loan Deal Passes Senate Inclusive of Grad Loans

Postby Archangel » Thu Jul 25, 2013 4:26 pm

http://money.cnn.com/2013/07/24/news/ec ... hpt=hp_bn3

This fall, undergraduate students will pay an overall interest rate of 3.86% on their loans. It is comprised of the yield on the 10-year Treasury note on June 1, plus an additional 2.05%. Graduate students will have to pay 5.41% on loans this fall, or 3.6% over the 10-year Treasury, also on June 1.

However, if interest rates were to spike, the bill makes provisions to cap the rates. Loans for undergraduates will be capped at 8.25% and for graduates at 9.5%.

The bill won support from Senate Republicans. However, left-leaning Democrats and student groups opposed the bill for hiking rates in coming years.
"The truth of the matter is the bill on the floor would be a disaster for the young people of our country who are looking to go to college," said Sen. Bernie Sanders, a Vermont Independent who opposed the bill. "This makes a bad situation worse."
Under the deal, high school students, like Dakota Friend, 16, could be paying more for student loans when she attends college. However, it will benefit her sister, Briana Mullen, who is currently a rising junior at University of California, Berkeley.


If interest rates spike then grad loans will be capped at 9.5% :shock:

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francesfarmer
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Re: Student Loan Deal Passes Senate Inclusive of Grad Loans

Postby francesfarmer » Thu Jul 25, 2013 4:44 pm


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Archangel
Posts: 106
Joined: Sat Jul 07, 2012 8:08 pm

Re: Student Loan Deal Passes Senate Inclusive of Grad Loans

Postby Archangel » Thu Jul 25, 2013 4:53 pm

Thanks for the link!

Now because treasury yields were at a post-WWII low last year, this formula actually reduces student loan rates slightly for next year. But it raises them, drastically, going forward, assuming (as the CBO projects they will) interest rates will rise toward anything even remotely close to their historical averages.

For example, graduate and professional students would see their loan rates increase above the current 6.8% (Stafford) and 7.9% (Grad PLUS) rates if the yield on the T-bill were to be at the lowest annual rate it hit in any year between 1962 and 2011. If interest rates climb anywhere close to historical averages, the Stafford and Grad PLUS rates will climb to 9.5% and 10.5% respectively, where they’re capped by the bill.

WTF




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