Student Loan News, Updates and Blog Posts

Wednesday Rant!

If I was a student graduating in 2009 with Stafford loan debt the news of the decreased interest rates, which just broke last week and will go into effect this July 1, would anger me to know end.

I liken these rate decreases to a carrot dangling in front of a typical witless rabbit. You and I both know he will never catch his prize but yet he hops, hops, hops desperately in hopes of snatching it. Sure, the Stafford loan rates which dropped to 2% and 2.5% respectively look mouth watering, but most of you won’t get the chance to sink your teeth into them.

Stafford loan rates have been fixed since July 1, 2006, and at much higher levels than today’s current market. In fact, we already know what the rates will be through the 2012-13 academic year, and these fixed interest rates have many up in arms.

It wasn’t all that long ago when all Stafford loan rates were determined by the 91-day T-bill and pegged at certain margins above the three-month treasury yield in late May, which is how the historically low 2% and 2.5% rates were arrived at last week. Today, only the loans which were dispersed prior to July 1, 2006 are effected by the T-bill and subject to the change (they are variable rates). Today’s graduates may have had one or two loans at most from that desirable time frame with the majority of loans being disbursed afterwards.

So when you pick up that paper, visit a website, or see a newsflash on TV about Stafford loan rates dropping to historic lows just know it probably won’t effect you, and if it does it will be in a very small way. It sure would be nice if the rabbit could catch the carrot once in a while.

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