Student loan help may or may not come in the form of fixed interest rates
It looks as though the Senate has come to a bipartisan deal in an effort
to provide student loan help to those with educational debt. A decision
has come on the overheated issue of whether or not to extend keeping
student loan rates where they have been since the summer of 2006 or
raise them for all new loans taken out as of fall of this year.
Re-authorizing the Higher Education Act of 2013 would have kept
steadily low rates of 3.4 percent which have been seen since 2007.
With the yield on the 10-year Treasury note topping out at 4% but
seeing rates as low as 1.38%, students would still reap the benefits of
low rates. Not so anymore.
Many in Congress were pushing for The Student Loan Affordability
Act of 2013 which would have maintained current interest rates for
the next two years. Congress would then have been able to work
towards a long-term solution. The intention was to have the cost of the
bill offset by closing tax loopholes; not taking from other education
programs that are already strapped and struggling financially.
Providing students help through low interest rates was the initial goal
of many in Congress. Unfortunately, not everyone agreed as a
decision came down to the wire.
Finding help may come in the form of Interest Rate for Education
Loan consolidation and student loan forgiveness as interest rates are
based on the yield of 10-year Treasury bills. Rates may vary from
year to year but over the life of the loan will remain fixed. With rates
capped, the risk of them rising indefinitely is avoided. For
undergraduate loans, rates will be capped at 8.25 percent. For
graduate loans, rates will cap at 9.25 percent.
While the final details will come from the Congressional Budget
Office, it is agreed that undergraduate loans will be set at the 10-year
Treasury yield plus 1.8 percentage points. Graduate loans? 10-year
yield plus 3.4 percent. Parent PLUS loans, 10-year yield plus 4.5
percent. If the Treasury bill yield goes above 5%, new loan holders
subject to these new rates will end up paying more than their
predecessor borrowers. Along with that, subsidized loans that
typically have a lower rate than those of subsidized will be the same.
College graduates are having a harder time than ever before finding
gainful employment. Worried that they will not be able to pay off
their loans, many borrower's say that it's even difficult for them to
make their monthly payment. As a result, debt consolidation is
becoming a more frequently used term as consumers, student and
parents alike; seek a solution to dealing with their post-education
Getting help through loan consolidation applies to federal loans only.
Those who hold both federal and private loans don't have the option
to combine both but can consolidate several federal loans into one.
This gives the option of having a lower monthly payment and the
possibility of student loan or teacher loan forgiveness. So for those
who do hold multiple federal loans, consolidating may be a great
option in seeking student loan relief.