What Is The Current Student Loan Interest Rate

What Is The Current Student Loan Interest Rate – It’s America’s fastest-growing debt: student loans. 1 Student loan debt is currently at an all-time high of $1.58 trillion, and approximately 45 million Americans currently have student loans. 2, 3 Wow! In fact, most college students (65%) graduate with student loans. 4 The average student loan debt per borrower is $38,792 and the average monthly payment is $393.5.6.

This is just a preview of what’s happening with student loans in America today. But read on for the latest student loan research, including:

What Is The Current Student Loan Interest Rate

There are two types of student loans: federal loans and private loans. As of January 2022, 43.4 million borrowers had federal student loans, meaning their loans were funded by the U.S. Department of Education. 7 In fact, more than 90% of student loans are federal loans and fall under three major federal loan programs: Direct Loan. Loans, Federal Family Education Loans (FFELs) and Perkins Loans8.

How Student Debt Worsens Racial Inequality

The FFEL program was the first federal student loan program created in 1965. Although the program was canceled in 2010 (meaning no new loans have been made since then), borrowers still owe a total of $230 billion in outstanding debt in the FFEL9 program. All new federal student loans now come from the Direct Loan Program. There are three types of Direct Loans: Subsidized Direct Loans (based on FAFSA financial need), Unsubsidized Direct Loans (without proof of financial need), and PLUS Direct Loans (where students or parents take out loans to fill gaps of costs after graduation). ). depletion costs). private loans).

Here’s a breakdown of the amount owed and the number of borrowers for each major type of federal student loan: 10

Interest rates on federal loans change over time and vary based on the type of loan and the disbursement date (also called the date the funds are provided to the borrower). Perkins loans are the only exception: a fixed interest rate of 5%.

Interest rates on federal student loans are currently temporarily 0% due to the CARES Act. But once it’s over, these are the rates for direct loans between July 1, 2021 and July 1, 2022: 11

Interest Rates: Different Types And What They Mean To Borrowers

The pandemic has certainly affected many things, including the student loan industry. Federal student loan payments have been suspended since March 2020 due to the CARES Act. But a reboot is planned for September 1, 2022.

The good news is that no interest accrues while these payments are in abeyance, so now is a great time to keep putting money into federal loans because it all goes straight to the principal. But not everyone can take advantage of the situation. Here’s the current state of federal student loan debt (including Direct Loans and Department of Education FFEL Program loans) as of the first quarter of 2022. 12

While only 1% of federal student loan accounts are in active repayment status, it’s unclear how many people have continued to make student loan payments during the pandemic. But our 2022 Personal Finance Study found that 6 in 10 people with student loan debt don’t

Make payments when payments stop during the pandemic. That means the end of student loan forgiveness is sure to be a rude awakening for most people.

Student Loans Could Use Some Market Discipline

) of a bank, credit union, national credit institution or other type of financial institution. Private student loans tend to cost more, with interest rates as high as 14.18%. 13 As of January 2022, private loans accounted for approximately 8.4% of total student loan debt, but the nation’s private student loan debt balance still exceeds $140 billion. 14

So if 45 million Americans have student loan debt, let’s talk about how they pay it off (or don’t pay it off).

It takes the average American 20 years to pay off their college loans, but it can take up to 45 years or more. 15 With the average student loan interest rate at 5.8%, many borrowers (21% to be exact) see their loan balances grow in the first 5 years. 16

What is this like in real life? So if you make an average monthly payment of $393 on a $38,792 student loan with an interest rate of 5.8%, it would take you 11 years to pay it off. Plus, you’ll end up paying just $14,052.09 in interest.

Roadmap To Relief: Your Guide For Student Loan Repayment

Alternatively, if you paid off the same loan over 30 years (with monthly payments of $227), you would end up paying $43,526.30 in interest, more than the amount you originally borrowed. Ouch

If you’re wondering if student loan debt (and all the interest) is worth it, just hear this: 44 percent of high school graduates will attend a four-year college, but only about two-thirds of those students graduate . .18

19 If you took out a student loan but didn’t finish your degree, you still have to pay back the loan plus interest. me

The problem with student loan debt is that people are still paying for college long after they’ve left their alma mater. Americans between the ages of 30 and 39 carry the most student loan debt, totaling $504 billion, but those aged 18 to 29 are not far behind at $357 billion. No student loans. In fact, they collectively owe about $25 billion. twenty one

This State Wants To Pay Off $40k In Student Loan Debt For First Time Homebuyers

But it’s unclear whether that total comes from degrees earned later in life, lingering loans from their youth, or money they borrowed to put their children or grandchildren through school.

Fun Fact: Student loans began in part as a way to train more scientists and engineers to defeat Russia in the space race in 1957. The National Defense Education Act of 1958, intended to increase enrollment in higher education (especially science, mathematics, and foreign languages), is the most likely reason why the number of college students increased from 3.6 million in 1960 to 7.5 million in 1970. twenty-two

But college tuition isn’t the only thing that’s grown over the decades. As we mentioned earlier, student loans are the fastest growing form of debt in the United States. In fact, we’ve only seen 157% growth since the Great Recession of 2007. 23 Whether this is due to rising tuition rates (more than double what they were 30 years ago), inflation, or the greatest social pressures. A college degree and student loan debt are steadily growing. twenty four

The global cost of living has also risen over the past 30 years, with higher education costs rising much faster than other areas such as health care, housing, and food. Since 1994, the cost of education has increased more than 436 percent. 25

How To Calculate Student Loan Interest

And the result is more expensive tuition and increased living costs. . . (You guessed it) more student loan debt. More than ever, students are taking out loans to get their education, regardless of the actual cost.

Yes, these numbers can be a little overwhelming (especially if you’re a high school student or have kids going off to college), but there is hope. Keep in mind: 1) some high-paying careers don’t require a degree, and 2) even if the cost increases, there are ways to get a degree without going into debt.

These numbers show the reality of the student loan crisis, but that doesn’t mean you have to become just another statistic.

In fact, 47% of young adults have delayed buying a home, and 21% are even waiting to get married because of student loan debt. 27 Additionally, 60% of people with a degree and student loans say their retirement savings are not connected. Orbit.28

The Truth About Student Loans

And don’t forget the $25 billion owed by people 70 and older. Some Americans are still saddled with student loans during what should be their golden years of retirement.

According to our quarterly research, 71% of people with student loans to pay for college say they wish they had been more educated about debt before they took out a loan. More than half (53%) regret taking out student loans, and 43% of those who took out student loans regret attending college.

. However, students are urged to do whatever they can, including borrowing money, to earn a college degree.

Additionally, 22% of borrowers who graduated in the 2015-2016 school year struggled to repay their student loans during their first year of college. By the time they graduate, 44% of graduates have found employment outside of their major. 30 It is not clear whether student loans contribute to this situation, but the pressure to pay them back certainly does not help graduates find the right jobs.

Student Loan Interest Rates Rise For Next Year

With so many Americans feeling the crushing burden of student loan debt, everyone wants to have their loans forgiven. But while President Biden built much of his campaign on forgiving at least $10,000 of student loan debt per borrower, he has yet to follow through on that promise.

To be fair, Biden has forgiven more than $15 billion in student loan debt for select borrowers since taking office. 31 But this was done primarily to protect borrowers with disabilities by enforcing or modifying existing federal student loan policies aimed at students graduating from schools that have closed and those working in public service. second

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