The Rate Of Student Loan Essay

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Student loans, also often called student debts, are financial aids in a loan form that requires borrowers to repay in the future (Wikipedia). Usually, student loans mean to provide students with financial issues the opportunity to obtain a college degree, which leads to an average lifetime income increase of $1.13 million for men and $792,000 for women (University of Kansas 1). As student loan aims at helping people live a better life, many college students exhibit negative attitudes towards interest rate of student debt, which is considered being too high, and debt issuers and the market are believed as the cause of high interest rate. Is it really true that student loans are tools of capitalists to rip off every penny from students? What factors exactly determine the rate of student loan?

In fact, more than 90% of outstanding student loans are federal loans issued by the government, United States Department of Education, and therefore, their rates are determined by federal laws. According to the Bipartisan Student Loan Certainty Act passed in August 2013, federal student debt rate should be reset annually based on 10-year Treasury Note rate with a fixed margin in addition. For 2016-2017 academic year, standard 10-year federal undergraduate student loan rate is 3.76% and the graduate loan rate is 5.31%, according to U.S. Department of Education.

In contrast, student loan issued by private institutions has considerably higher rate. For example, the starting rate for

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