Student Loan Rates

[edro]

What's the deal with student loan rates over the last 20 years or so?

I graduated around 2003 and my government loan (was called FAFSA, now through MOHELA) rate is 2.63%.
I hear most millennials have 5-15%+ rates.

Does the government not subsidize loans anymore?
What happened?

This still shows 3.76%... not too bad.
https://studentaid.ed.gov/sa/about/announcements/interest-rate

 

[dullard]

Politics happened. The government is borrowing money at ~1.5% and then turning around and reloaning it to students at ~4% to ~7%. Some of those are the "subsidized" loans.

 

[Ken g6]

I heard SSL (Subsidized Student Loans?) was deprecated for TLS (Trying to Leech Students?).

 

[CraKaJaX]

I graduated in 2010. Mine are from 2.8 - 6.8, and that's pretty good I think. One of the guys I work with just sent his first daughter off to school - the lowest rate he got was 8.2. The LOWEST!!!

 

[clamum]

I graduated in 2006 and it looks like mine is close to yours, OP:

 

[s0me0nesmind1]

Politics happened. The government is borrowing money at ~1.5% and then turning around and reloaning it to students at ~4% to ~7%. Some of those are the "subsidized" loans.

Not politics.

Schools realized "Oh shit, the government will pay the tab and take the risk for anyone and everything? Let's jack up our rates, add ridiculous on campus policies, pump a shit load into the football team - because we'll ya'know edumacation and such. Let's make ridiculous degrees with no job market and convince kids to 'Pursue their dreams' even though there aren't any jobs when they get out."

Sent from my SM-G935V using Tapatalk

 

[Cozarkian]

What's the deal with student loan rates over the last 20 years or so?

I graduated around 2003 and my government loan (was called FAFSA, now through MOHELA) rate is 2.63%.
I hear most millennials have 5-15%+ rates.

Does the government not subsidize loans anymore?
What happened?

This still shows 3.76%... not too bad.
https://studentaid.ed.gov/sa/about/announcements/interest-rate

Subsidized means the government pays the interest while your loans are differed, it doesn't mean they get you a lower rate. The lower rate comes from the reduced risk of government guaranteed lending.

I don't track current rates, but my loans ranged from 6.8% to 8.3%. Obama's consolidation program was a nice gift that dropped the rates to 5.8% and 5.3% with auto pay.

I've heard the rates have recently or will be dropping.

 

[Cozarkian]

Not politics.

Schools realized "Oh shit, the government will pay the tab and take the risk for anyone and everything? Let's jack up our rates, add ridiculous on campus policies, pump a shit load into the football team - because we'll ya'know edumacation and such. Let's make ridiculous degrees with no job market and convince kids to 'Pursue their dreams' even though there aren't any jobs when they get out."

Sent from my SM-G935V using Tapatalk

I don't believe schools control the rate on the federal loan program. They just jack up tuition so students have to borrow more and seek private loans at higher rates.

 

[dullard]

Not politics.

From the first line of the first link in the first post of the thread:

"In August 2013, Congress passed and the President signed the Bipartisan Student Loan Certainty Act of 2013."

Now please tell me how that isn't politics. Congress is the one who passes the laws regarding the exact rate charged, the president signs it or vetos it.

For example ( https://www.congress.gov/bill/113th-congress/house-bill/1911/text ):

Rates for undergraduate fdsl and fdusl...the applicable rate of interest shall...be equal to the lesser of
i) a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus 2.05 percent; or
(ii) 8.25 percent.

You could make the argument that the FED tries to set the 10-year treasury rate. And thus the federal reserve also plays a role. But it is politics that sets the potential profit/loss that the government makes on the loans to students by how much higher it is than the rate the government borrows the money at.

 

[edro]

One of the guys I work with just sent his first daughter off to school - the lowest rate he got was 8.2. The LOWEST!!!

What? How?
That's what I don't understand.
Is there a limitation on the loans linked in the OP? (3.76% undergrad, 5.31% graduate)

https://studentaid.ed.gov/sa/eligibility/basic-criteria
This is all pretty basic stuff, except #1 is to prove you have a financial need.
There must be family income limits that may exclude people from Direct Loans.

 

[PowerEngineer]

Not politics.

Schools realized "Oh shit, the government will pay the tab and take the risk for anyone and everything? Let's jack up our rates, add ridiculous on campus policies, pump a shit load into the football team - because we'll ya'know edumacation and such. Let's make ridiculous degrees with no job market and convince kids to 'Pursue their dreams' even though there aren't any jobs when they get out."

Sent from my SM-G935V using Tapatalk

Just feeling a need to rant? All wrong or irrelevant.

Talking to graduate students, I'm told that their federally subsidized loans are around 6% and unsubsidized loans around 8%. Yes, times have changed!

 

[rcpratt]

My wife's were 6-8%, all opened between 2006 and 2010. Ridiculous.

 

[highland145]

8% on top of massively inflated tuition...I am in the wrong business.

And I have a 15 y.o......

 

[s0me0nesmind1]

Just feeling a need to rant? All wrong or irrelevant.

Talking to graduate students, I'm told that their federally subsidized loans are around 6% and unsubsidized loans around 8%. Yes, times have changed!

You're an idiot.

Interest rates increase because the amount of loans have increased, the loan amounts have increased, and most importantly the number of people defaulting and not paying their loans has skyrocketed. Shit has to get paid, you can't keep interest rates low when so many are screwing the system.



Sent from my SM-G935V using Tapatalk

 

[Exterous]

What happened?

College loan rates aren't tied to the same system that more traditional loans are. Congress actually has control over a whole host of listed interest rates and, where Congress is involved, you get the expected atypical results. College loan rates out of whack with prime rates, absurdly low gain expectations for anything based on the 7520 rate list etc

Interest rates increase because the amount of loans have increased, the loan amounts have increased, and most importantly the number of people defaulting and not paying their loans has skyrocketed. Shit has to get paid, you can't keep interest rates low when so many are screwing the system.

Er...no. There are a variety of federal loan products but they are more influenced by Congress deciding to act as opposed to things like amounts or defaults

https://www.sofi.com/blog/interest-rate-matters-graduate-student-loans/

 

[Red Squirrel]

Hearing all this stuff makes me glad I was lucky enough to not need a student load in the first place. What's crazy is hearing of people who have like 100k in student loans. That's basically a mortgage.

 

[highland145]

Mortgage under a bridge in NY