College Loan Interest Rates Back in the Spotlight

June 6, 2014

With high school commencements right around the corner, the reality of paying for college costs this coming September may be front of mind for college-bound seniors and their parents. Interestingly, a couple of significant announcements in the college loan arena have recently surfaced.

First are the new interest rates for loans. Last August, the President signed the Bipartisan Student Loan Certainty Act of 2013, which set new policy on college loan interest rates. The purpose of this legislation was to peg the interest charged on Federal Direct Stafford and PLUS loans more closely to prevailing Treasury rates at loan initiation and thereby a hopefully more-affordable payment requirement for the life of the loan. Recently, on May 7th, the US Treasury held a 10-year note auction that resulted in a high yield of 2.612%, therefore the corresponding rates for the upcoming year on college loans could be 4.66% for Stafford loans, 6.21% on graduate loans and 7.21% on PLUS loans. Under the Certainty Act, borrowers from July 1, 2014 thru July 1, 2015 would see these rates fixed for the life of the loan; a critical benefit.

Of course, while this legislation is welcomed by new college students and their parents, it doesn’t do much for those already in debt and who have loans from past years on their personal ledgers. For these folks, Senator Elizabeth Warren (D-MA) is beating the Congressional drum for further legislation. This past month, she introduced a new bill entitled; Bank on Students Emergency Loan Refinancing Act, due to be considered by Congress this coming month. The chief benefit of the proposal would be to let all federal borrowers of college loans refinance their college-related debt into new, lower rates to make repayment more affordable. Warren feels that allowing past borrowers to refinance their loans into better rates and terms could help ease the repayment burden and allow such consumers to again participate in national economic growth through spending, and purchasing homes. Without such help, Warren maintains, a critical element of our economy may be an anchor on our national growth.

Current college students, graduating high-school seniors and their parents may want to keep an eye on the progress of this legislation. If you have a college-bound high school student or know someone who’s concerned about college costs and how to pay for college without going broke, give our office a call.