{"id":27082,"date":"2024-05-10T04:50:35","date_gmt":"2024-05-10T09:50:35","guid":{"rendered":"https:\/\/ustower.net\/?p=27082"},"modified":"2024-05-10T04:50:40","modified_gmt":"2024-05-10T09:50:40","slug":"student-loan-rates-set-to-reach-16-year-high-its-a-shock","status":"publish","type":"post","link":"https:\/\/ustower.net\/?p=27082","title":{"rendered":"Student loan rates set to reach 16-year high: ‘It’s a shock’"},"content":{"rendered":"\n

The borrowing cost for student loans<\/u><\/a> is poised to reach a 16-year high.<\/p>\n\n\n\n

The interest rate on a federal undergraduate student loan is expected to climb to 6.5% in July, which would mark its highest level since 2008, financial-aid expert Mark Kantrowitz told ABC News. The current interest rate of a new student loan is 5.5%.<\/p>\n\n\n\n

The borrowing rate for student loans is set by adding a fixed amount of 2.05 percentage points to the yield on the 10-year Treasury bond, which is determined annually at a May auction. At the auction on Wednesday, 10-year Treasury bonds were sold at a 4.48% yield.<\/p>\n\n\n\n

The yield for 10-year Treasury bonds, in turn, closely tracks the benchmark interest rate<\/u><\/a> set by the Federal Reserve. That benchmark rate remained relatively low for years but has surged<\/u><\/a> since 2022, when the Fed undertook an aggressive series of interest rate hikes to fight inflation. In response to rising interest rates, student loan rates have soared.<\/p>\n\n\n\n

“It\u2019s a shock because people had gotten used to low rates,” Kantrowitz said.<\/p>\n\n\n\n

Since student loans are typically fixed, the forthcoming rate will apply to new loans but will not affect previous ones. The new rate will apply to loans for the 2024-2025 academic year beginning on July 1.<\/p>\n\n\n\n

On a 10-year student loan of $28,000 under the forthcoming rate, the borrower will pay interest of about $10,000, which amounts to a roughly 35% higher cost for the borrower when compared with a student foregoing loans, Nancy Goodman, founder and executive director of higher-education nonprofit College Money Matters, told ABC News.<\/p>\n\n\n\n

Under the forthcoming rate, such a borrower would pay an additional $2,000 over the course of the loan when compared with the current rate, Goodman explained.<\/p>\n\n\n\n

“That\u2019s a big burden,” Goodman added. “I hate to see that for students.”<\/p>\n\n\n\n

In December, the Fed forecasted<\/u><\/a> three quarter-point interest rate cuts over the course of 2024. Due in part to stubborn inflation since then, however, the Fed has recently cast doubt<\/u><\/a> about whether those rate cuts will happen after all.<\/p>\n\n\n\n

At a meeting earlier this month, the Fed held interest rates steady<\/u><\/a> at their highest level since 2001.<\/p>\n\n\n\n

Because the interest rate for student loans depends on the yield for 10-year Treasury bonds set at an auction in May, the postponement of interest rate cuts locked in high borrowing costs for students for the next academic year.<\/p>\n\n\n\n

“Student loans have gotten caught up in the Fed\u2019s attempt to rein in inflation, and the students who are borrowing are going to pay the price,” Goodman said.<\/p>\n\n\n\n

The average annual tuition for a four-year, in-state public college stood at $11,260 for the most recent academic year, which amounted to a 2.5% increase before inflation adjustment, the College Board<\/u><\/a> says.<\/p>\n\n\n\n

For a private, four-year college, the average annual tuition stood at $41,540 over the most recent academic year, which marked a 4% increase before inflation adjustment, according to the College Board.<\/p>\n\n\n\n

The jump in borrowing rates will exacerbate the rising cost of tuition, especially for low- and middle-income students, Kantrowitz said.<\/p>\n\n\n\n

“College is becoming less and less affordable every single year,” Kantrowitz added.<\/p>\n\n\n\n

Meanwhile, the rate of students pursuing federal loans has plummeted.<\/p>\n\n\n\n

During the current academic year, roughly 35% of college students have completed the Free Application for Federal Student Aid, or FAFSA, according to data from the National College Attainment Network<\/u><\/a>. That share of college students completing FAFSA forms marks a decline of 13 percentage points when compared to the previous academic year, the National College Attainment Network found.<\/p>\n\n\n\n

The drop in aid applications suggests that many college students are pursuing low-cost options or opting against college altogether, Goodman said.<\/p>\n\n\n\n

“Colleges should be a little concerned,” Goodman said. “Students are getting smarter about the cost of borrowing and colleges are having a more challenging time filling their classes.”<\/p>\n\n\n\n

“This is hard for everybody,” Goodman added.<\/p>\n\n\n\n

Abcnews<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The borrowing cost for student loans is poised to reach a 16-year high. The interest rate on a federal undergraduate student loan is expected to climb to 6.5% in July, which would mark its highest level since 2008, financial-aid expert Mark Kantrowitz told ABC News. The current interest rate of a new student loan is 5.5%. The […]<\/p>\n","protected":false},"author":5,"featured_media":27083,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[28329,8905,6217,28330],"class_list":["post-27082","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-politics","tag-borrowing-costs","tag-interest-rates","tag-student-loans","tag-top-levels"],"_links":{"self":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/27082","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27082"}],"version-history":[{"count":1,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/27082\/revisions"}],"predecessor-version":[{"id":27084,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/27082\/revisions\/27084"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/media\/27083"}],"wp:attachment":[{"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27082"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27082"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27082"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}