According to a report by the Consumer Financial Protection Bureau the average student loan interest rate is around 10.8%. Thisis significantly higher than the average credit card interest rate of 16.9%. So why is the student loan interest rate so high?
There are a few reasons for this. First when you take out a student loan you are borrowing money that you will likely not be able to repay until after you graduate and find a job. This means that the lender is taking on a higher risk and thus charges a higher interest rate.
Second the federal government has a monopoly on the student loan market. This means that there is no competition and thus no incentive for the government to keep interest rates low.
Third student loans are not dischargeable in bankruptcy. This means that if you default on your loan the lender can still come after you for the money. This also increases the risk for the lender and thus the interest rate.
So why is the student loan interest rate so high? It’s because of the risk involved for the lender and the lack of competition in the market. If you’re looking to get a student loan be sure to shop around and compare rates to make sure you’re getting the best deal possible.
How is your student loan interest rate calculated?
The interest rate on your student loan is calculated based on the prime rate your credit score and the length of your loan.
Why is my student loan interest rate so high?
There are a few reasons why your student loan interest rate may be high.
One reason may be that the prime rate is high.
Another reason may be that your credit score is low.
Lastly the length of your loan may be shorter which typically results in a higher interest rate.
How can I lower my student loan interest rate?
You can lower your student loan interest rate by consolidating your loans paying your loans off early or refinancing your loans.
Will consolidating my student loans help lower my interest rate?
Yes consolidating your student loans can help lower your interest rate.
How can I consolidate my student loans?
You can consolidate your student loans by going through a private consolidation company or through the federal government.
What is the difference between consolidating my student loans through a private company and the federal government?
Consolidating your student loans through the federal government is typically more beneficial because you may be able to get a lower interest rate.
How can I pay my student loans off early?
You can pay your student loans off early by making extra payments each month or by making a lump-sum payment.
How will paying my student loans off early help me save money?
Paying your student loans off early will help you save money because you will pay less interest over the life of the loan.
What is refinancing?
Refinancing is when you take out a new loan to pay off your existing student loans.
Should I refinance my student loans?
It depends.
You should consider refinancing your student loans if you have a good credit score and can get a lower interest rate.
How do I know if I have a good credit score?
You can check your credit score for free on a website like Credit Karma.
How can I get a lower interest rate when I refinance my student loans?
You can get a lower interest rate when you refinance your student loans by shopping around and comparing rates from different lenders.
What are the benefits of refinancing my student loans?
The benefits of refinancing your student loans include the possibility of lowering your interest rate extending your loan term and changing your repayment plan.
What are the risks of refinancing my student loans?
The risks of refinancing your student loans include the possibility of ending up with a higher interest rate having to pay origination fees and losing any existing perks and benefits that you have with your current loans.
How do I decide if refinancing my student loans is right for me?
You should consider refinancing your student loans if you have a good credit score and can get a lower interest rate.
You should also think about whether you want to extend your loan term or change your repayment plan.
