The average interest rate for federal student loans is now over 7%. That’s nearly double the average rate of a typical savings account and more than triple the average rate of a typical credit card. For private student loans the average rate is even higher at over 10%.
With rates like these it’s no wonder that so many people are struggling to repay their student loans. In fact the average borrower now has nearly $30000 in student loan debt and the average monthly payment is nearly $400.
So why are federal student loan interest rates so high?
There are a few reasons. First the federal government is the largest provider of student loans and it’s not a for-profit organization. That means that the government doesn’t need to make a profit on its loans.
Second student loan interest rates are set by Congress and they’re currently at a historically low level. In fact the current interest rates are lower than they were in the early 1990s.
Third federal student loan interest rates are fixed for the life of the loan. That means that if rates go up in the future your payments won’t increase.
Fourth the interest on federal student loans is tax-deductible. That can save you a significant amount of money over the life of the loan.
Finally federal student loans offer a number of repayment options that can make it easier to manage your debt. For example you can choose to make interest-only payments or you can enroll in an income-based repayment plan.
If you’re struggling to repay your student loans there are a number of options available to you. You can consolidate your loans refinance your loans or enroll in an income-based repayment plan. You can also contact your loan servicer to discuss your options.
What is the average interest rate for federal student loans?
The average interest rate for federal student loans is 4.
53%.
How are federal student loan interest rates determined?
Federal student loan interest rates are determined by the 10-year Treasury note rate.
Why are federal student loan interest rates so high?
Federal student loan interest rates are so high because the 10-year Treasury note rate is so high.
How can I lower my federal student loan interest rates?
You can lower your federal student loan interest rates by consolidating your loans.
Will consolidating my federal student loans lower my interest rate?
Yes consolidating your federal student loans will lower your interest rate.
How much will consolidating my federal student loans lower my interest rate?
Consolidating your federal student loans will lower your interest rate by 0.
25%.
Is there anything else I can do to lower my federal student loan interest rates?
You can also lower your federal student loan interest rates by refinancing your loans.
What is the difference between consolidating and refinancing my federal student loans?
Consolidating your federal student loans will give you a new loan with a new interest rate while refinancing your federal student loans will give you a new loan with a lower interest rate.
How much can I lower my interest rate by refinancing my federal student loans?
You can lower your interest rate by up to 1.
0% by refinancing your federal student loans.
Is there anything else I need to know about consolidating or refinancing my federal student loans?
Yes you should know that consolidating or refinancing your federal student loans will extend the repayment period of your loans.
How much will consolidating or refinancing my federal student loans extend the repayment period of my loans?
Consolidating or refinancing your federal student loans will extend the repayment period of your loans by up to 10 years.
Will consolidating or refinancing my federal student loans increase my monthly payments?
No consolidating or refinancing your federal student loans will not increase your monthly payments.
How can I consolidate or refinance my federal student loans?
You can consolidate or refinance your federal student loans through a private lender.
What are the benefits of consolidating or refinancing my federal student loans through a private lender?
The benefits of consolidating or refinancing your federal student loans through a private lender include lower interest rates shorter repayment periods and fixed monthly payments.
What are the drawbacks of consolidating or refinancing my federal student loans through a private lender?
The drawbacks of consolidating or refinancing your federal student loans through a private lender include the possibility of a higher interest rate and the loss of certain borrower protections.
