Snowflakes looking to take out massive student loans for next year to fund the $50,000 price tag of their liberal bastion of choice, and maybe the occasional binge-drinking trip to Cancun for Spring Break, are about to get a little price hike. But, don't worry, you won't have to start paying on those loans for at least 4 years.
Beginning in July, interest rates on new federal student loans are set to rise by 0.69%, per data published by the Treasury, which would drive the interest cost of new undergraduate loans up to 4.45% from 3.76% for the academic year ending in June, a nearly 20% increase off an historically low base. Meanwhile, rates on some graduate loans are set to rise from 5.31% to 6% and rates on loans to parents and guardians are due to jump from 6.31% to 7%. As an example, the cost of a $10,000 loan would increase by about $400, according to an online calculator maintained by Bankrate.com.
Of course, these higher borrowing costs shouldn't be that big of a deal as some 44 million Americans only owe $1.4 trillion on their student loans, or a modest average of only $32,000 per borrower.
As Bloomberg points out, the Obama administration changed the methodology for calculating student loan rates in 2013 to link them to then sinking 10-year Treasury rates. And while that helped to lower rates for students for the past several years, now that the Fed is in rate-hiking mode, it's having the opposite effect.