Getting student loans has never been so easy — now, it’s the cheapest it’s ever been.
“The interest rates on federal student loans will fall by about half a percentage point in the 2016-17 academic year, to the lowest point in history, based on the results of the Treasury Department’s auction on 10-year notes,” according to Inside Higher Ed.
Undergraduate loans fell from 4.29 percent to 3.76 percent, graduate Stafford loans fell to 5.31 percent, and Grad PLUS and Parent PLUS loans fell to 6.31 percent.
Interest rates are one of the few parts of higher education finance tied to the market; the rate changes based on the market, not congressional mandate.
The drop in rates will likely encourage Hillary Clinton, among others, to call for congressional action to let students refinance their student loan interest rates. It would only save students a few hundred dollars, but supporters exaggerate its importance and ignore that refinancing primarily benefits richer students and expands the federal government’s control over market power in the student loan industry.
For individual students, the drop won’t push them to re-evaluate college plans. Higher tuition is the driver of college debt costs, not interest. If a student borrows $37,000 (the average debt load) at 4.29 percent, the interest is $1,587. Borrowing at 3.76 percent makes it $1,391, a $196 difference. Still, extra money for pizza and kebabs is a nice benefit of lower interest rates.
