Student loans could be cheaper because of the coronavirus outbreak. Here's how you could benefit on existing or future loans.
Following the economic fallout from the coronavirus pandemic, the Federal Reserve slashed interest rates to 0.25%. That cut, while not beneficial for those looking to maximize gains on savings, could push interest rates on student loans to record lows, saving money for people taking out student loans in the future. The rate cut could even help people with existing student loans if they're able to refinance them at a lower rate, though refinancing comes with some drawbacks. Visit Business Insider's homepage for more stories.
Interest rates on federal student loans could fall to record lows because of the coronavirus pandemic as soon as the upcoming academic year. In an effort to curb the economic fallout from the epidemic, the Federal Reserve slashed interest rates to 0.25%, which is bad news for savers but potentially good news for borrowers. For those taking out federal student loans in the future, interest rates could be dramatically lower than current rates, according to a report by The Wall Street Journal. Mark Kantrowitz, vice president of research at Savingforcollege.com, told The Wall Street Journal that interest rates on federal student loans could fall under 2% for the upcoming school year. The current interest rate on federal student loans for undergraduates is 4.53%. For graduate students, it's 6.08% and for PLUS loans it's 7.08%. Kantrowitz said he would expect the rates for the upcoming academic year, which will be announced this spring, to fall to 1.9% for undergraduates, and to 3.5% and 4.5% for graduate students and PLUS loans, respectively. President Donald Trump has already said he would suspend interest on some federal student loans "until further notice" because of the coronavirus, but the lower rates in the future could provide an extra boost to students as the economy seeks to recover from the coronavirus. The dip in interest rates would mostly impact those taking out new student loans, but people with existing student loans could also stand to benefit by refinancing, as interest rates from private borrowers are likely to fall as well. People currently paying off federal student loans could take advantage of lower interest rates from private borrowers by refinancing, dependent on having good credit and a few other factors. Kantrowitz estimated that fixed rates on private loans could fall to 2.8% for those with excellent credit.SEE ALSO: 3 times you should consider refinancing your student loans, according to a financial planner Join the conversation about this story »
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