Federal Reserve Rate Increase Explained and How You As A Student Will Be Affected
The interest rate increase announced by the Federal Reserve last month is the biggest in more than two decades, and it signals the Central Bank’s determination to fight inflationary pressures.
In the United States, inflation is now at a 40-year high. Many experts believe that interest rates will have to rise in order to keep inflation in check. This could have a negative impact on the economy, as higher interest rates make it more expensive to borrow money.
Interest Rates and Fees for Student Loans
While federal student loans come with a fixed rate set by the government, current borrowers aren’t affected because those loans carry less variable interest. New batches of federal loans are priced each July, based on the 10-year Treasury bond auction in May.
It’s a different case for private student loan borrowers. They are expected to pay more for their private loans – both fixed and variable rates are linked with benchmarks that track the federal funds rate.
Private lenders are already starting to price additional expected increases into their new fixed-rate loans. Higher-education expert Mark Kantrowitz says that rates on new private student loans are going to increase between 1.5% and 2%. It all depends on what kind of term you’re looking at, with an expected range from 7% to as high as 18%. This means that the variable rate will likely go higher first, but it could change quickly depending on the outcome of this development in private loan markets.
Make the most out of the situation
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Stratus and our loan officers want the very best and least expensive loan for you
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