Student Loans – Interest Rates, Now and Future

Variable vs Fixed

As of July 1, 2006 Stafford loans became fixed rate loans. This was not a new idea. Years ago all Stafford loans had a fixed interest rate. In time the structure changed and they became variable rate loans. Now they have again taken their original structure.

Some lenders make up for what they loose in interest rates by charging fees. In general 3% fees charged on a loan is the same as a point of interest. Therefore, if they keep to the restrictions on the interest rate yet charge you a loan origination fee or loan insurance then they recover what they are missing in interest payments right up front. Some lenders are willing to extend credit and waive the customary fees.

Rates and Interest Amounts

Though the interest rate changes can be modest, PLUS loans increased from 6.1% to 8.5%, for example. On, say, even as low as $16,000 borrowed, a 2.4% rate difference equals (approximately) a $400 difference in interest charges the first year alone.

You can visit www.bankrate.com/brm/mortgage-calculator.asp to see exactly how much your loan will cost you at a given interest rate.

The Future

There are no guarantees. The rates can change, since they’re similar to variable rate home loans, even after the loans are funded. Predicting interest rates, both near term and long term, is a task that challenges even the finest financial experts. If it were otherwise, the bond market would be a pretty dull affair (which it’s not). So, the best the average student or parent can do is to look to what those experts are predicting.

Follow The Leaders

Among the easier ways to follow those predictions is to look at various interest-bearing financial instruments, such as T-Bills or long-term corporate bonds. By examining those numbers, potential borrowers can get the best available guess about where interest rates are headed. That information is easily gained from any finance website, such as Yahoo Finance or some other personal favorite.

Student loans and other types of loans often vary in conjunction with the Treasury bill. The Treasury bill shows what the government projections are for selling its debt and what the buyers are expected to offer.

GPA sites

• First Residential Mortgage | Federal Home Loan Mortgage
• Ways Of Obtaining Mortgage Payment Assistance (financial advisor)
• How an increase in the price level changes interest rates? | Google
• What average interest rate should I expect to pay on a 20-year loan, if the variable rate is 4% right now? | Google
• Balloon Juice » Blog Archive » Our Junk Bond T-Bills