SYMPOSIUM SPEAKER – October 11, Heather Jarvis, What’s the deal with student loan interest rates?

Heather Jarvis - Student Loan ExpertREGISTER NOW and Save $50

Presentations scheduled for Tuesday, 12:30 - 1:20 pm, 1:50 - 2:40 pm
Lunch Keynote - Educational Debt: Will Student Loans Be the Next Bubble to Burst?
Breakout – Advanced Student Debt Management: A Checklist Approach to Advising Young Professionals
Anticipated CEs for each session: 1 CFP, 1 MN, 1 WI, 1 NASBA/CPE, 1 CIMA, .75 CLE

What’s the deal with student loan interest rates?

Congress sets the interest rates on federal student loans by statute and has made significant changes to the statutory scheme over recent years. For this reason, financial advisors will encounter federal student loans at interest rates from a low of under 2 percent to a high of 8.5 percent. Private student loan interest rates are tied to the creditworthiness of the borrower and are typically more expensive than federal student loans.

Are federal student loans at fixed or variable interest rates?
Since 2006, new federal loans are issued at fixed interest rates that don’t change over the life of the loan, but some clients with older federal loans still have variable interest rate loans.  Clients with variable interest rate federal loans should consider locking in a fixed rate with a Direct Consolidation Loan.  Direct Consolidation Loans are at fixed interest rates based on the weighted average of the underlying loans, capped at 8.25 percent for consolidation loans.  Advisors should carefully consider the pros and cons before recommending consolidation, as there are many details to consider.  Learn more about evaluating consolidation at the annual symposium.

What interest rates are current borrowers getting?
Since 2013, new federal student loan interest rates are determined annually based on the 10-Year Treasury Yield (a benchmark economic indicator) as measured at auction each May. Since rates have been tied to the market, we’ve seen rates ranging from 3.76 percent to 7.21 percent. This May, the yield was set at 1.710 percent so that federal loans originated on or after July 1, 2016 and before July 1, 2017 will have the following interest rates:

  • The interest rate for subsidized loans and unsubsidized loans to undergraduate students will be 3.76 percent (the 10-year Treasury rate plus 2.05 percentage points capped at 8.25 percent).
  • The interest rate for unsubsidized loans to graduate students will be 5.31 percent (the 10-year Treasury rate plus 3.60 percentage points capped at 9.50 percent).
  • The interest rate for GradPLUS and Parent PLUS loans will be 6.31 percent (the 10-year rate plus 4.60 percentage points capped at 10.50 percent).

How can clients lower their student loan interest rates?
Borrowers with strong credit may be able to reduce interest rates by refinancing with a private lender; however, advisors should carefully inform clients of the risks of refinancing federal student loans with a private lender. For example, gederal student loans include uniquely valuable consumer protections including discharge provisions, flexible repayment options, and potential for forgiveness.

Interested in learning more about student loans?  Join attorney and nationally recognized expert Heather Jarvis. View the detailed agenda for times and session descriptions.