In an era of low interest rates, somehow students are still being charged ridiculously high interest rates on student loans. The U.S. is virtually the only Western country that allows this type of scandal to occur – and occur it has, with student debt now equaling $1.4 trillion. That’s $400 billion more than the U.S. credit card debt. Charging the high interest rates that have caused this outrage should be outlawed, and public university tuition should be made free. A Wall Street speculation tax would pay for it nicely.
When it comes to college, tuition costs rising, and so are the interest rates on the loans to cover the tab.
Earlier this month, interest rates rose on new federal loans for the coming year. For new loans disbursed from July 1, 2017, to June 30, 2018, undergraduates will pay 4.45 percent. That’s an increase from this year’s rate of 3.76 percent.
And the private student loan market, which is already a more expensive way to borrow, is also edging higher. Both variable and fixed interest rates on private student loans rose nearly a point over the last year, according to a recent report by LendEDU, an online marketplace for student loans and student loan refinancing.
The average variable rate on a private student loan is now 7.81 percent, while the average fixed rate stands at 9.66 percent, LendEDU said.
The top concern parents and students said they now share — across the board — is the amount of debt they are about to take on to pay for a degree, according to a separate report by The Princeton Review. Contrast that to a decade ago, when the most commonly cited answer was not getting into their first-choice school.
About 60 percent of graduates leave college with some amount of student debt, owing an average of $28,400 per borrower, according to LendEDU.
Altogether, total student loan debt in the U.S. tops $1.4 trillion (including more than $165 billion of private student loan debt), which makes it the second-largest expense an individual is likely to make in a lifetime — right after purchasing a home.
The Federal Reserve has set its benchmark interest rate at 1.25 percent, yet average student loan rates remain far higher. Strikingly, the top average concern about attending university has become the level of debt instead of the level of education. This has definitely taken its toll on the society.