preview

The Interest Rates On Federal Student Loans Essay

Good Essays
College is not quite as optional as it once used to be in the era of our parents and their parents. To get a job that will pay substantially more than with just a high school degree, it is becoming more and more common for high school graduates to go straight to college. With the price of college skyrocketing, it is extremely common to take out student loans (from the government or private institutions), all which come with interest. This paper will focus on the different aspects of student debt, including rates, how they compare with car and mortgage debt, forbearance and deferment, default and delinquency, and adverse selection and moral hazard.
The interest rates on federal student loans are set every year depending on the 10-year treasury note rate in addition to a fixed percentage depending on the loan type. They are set by the United States Congress. Depending on the type of loan you acquire, your rate will be different. Direct Subsidized Loan and Direct Unsubsidized Loan rates for undergraduates are currently 3.76 percent, down from 4.29 percent last year. Direct Unsubsidized Loan rates for graduate students are currently 5.31 percent, and were 5.84 percent last year. Direct PLUS Loan rates for graduate students and parents are currently 6.31 percent and were 6.84 percent last year. [Access Group, 2016].
Privately issued loans may be issued by private institutions such as banks, schools, credit unions, and state agencies. Generally, privately issued loans are more
Get Access