How much do student loan interest rates increase?
One expert predicts the increase will be around $1,000 on a $10,000 loan.
ATLANTA — Student loan interest rates are about to rise, but not to the level they’ve reached in the past.
On Tuesday, the US Treasury will make decisions that will raise interest rates on federal student loans. The Federal Reserve’s decision to raise interest rates has already had an impact on private lending.
Madison Keys, a sophomore at Georgia State, borrowed money to go to college. However, she will have to borrow more to complete her studies.
“It’s only been around $5,000 so far,” she told 11Alive. “Of course, that won’t be the case when I graduate. I just try not to think about it.
The federal student loan rate is fixed and changes once a year.
“It seems very likely that the new interest rates will be at least one percentage point higher, maybe one and a half percentage points higher,” said student financial aid expert Mark Kantrowitz. “Probably close to $1,000 and that’s for $10,000 borrowed.”
Although the decision on how much to raise the interest rate will be made this week, it will not take effect until July 1. Students cannot borrow money for next year until then.
Kantrowitz said that in this era of high inflation, rising prices may seem daunting, but there is a silver lining.
“Interest rates are still going to be low relative to past interest rates,” he said. “At one point, student loans were at 6.8%. and on loans to parents up to 8.5%”
According to the National Center for Education Statistics, the cost of a four-year public university has increased about 13% over the past decade.
Meanwhile, Keys has scholarships in addition to loans she will have to repay.
“I hope I get a job that will allow me to pay it back fairly quickly,” she added.
First, there is the university degree which is costing him more and more every year.