stafford loan interest rate not 6.8%?

[a student]

When I took out the unsubsidized stafford loan for pharmacy school, I was told the interest rate would be 6.8%. But yesterday when I checked my loans, I realized that the interest rate has been 5.4%. Is there a different rate while I am in school? Why is it not 6.8%?

Also, my loan servicer seems to have combined my subsidized loans from undergrad with the unsubsidized grad school loan. When I graduate, will there be a way to pay off the one with higher interest first or do I have to be paying for both at the same time? I have never consolidated my loans before.

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[Digsbe]

I believe they lowered it this year and somehow tacked it to market interest rates.

I'm not sure about the loan consolidation though, I think mine were all taken by the government from undergrad as well. Idk about the individual interest rates though.

 

[Jibby321]

My school said 6.21%

 

[a student]

My school said 6.21%

What is your actual rate?

 

[Jibby321]

What is your actual rate?

I haven't checked my servicer but according to the most recent email from financial aid (3 days ago) it is going to be 6.21%

 

[Digsbe]

Found this: https://studentaid.ed.gov/types/loans/interest-rates

Looks like rates went up after going down last year.

 

[a student]

Found this: https://studentaid.ed.gov/types/loans/interest-rates

Looks like rates went up after going down last year.

Thanks for sharing! That explains both my 5.4 and Jibby's 6.2. Now I'm sad that interest is going up again =(

 

[xiphoid2010]

Thanks for sharing! That explains both my 5.4 and Jibby's 6.2. Now I'm sad that interest is going up again =(

Last year they changed the student loans interest rates to one that is tied to 10-yr treasury note yield. For graduates, the Stafford loan rate is set to yield + 3.6%, with a cap of 9.5%.

Well, we all know that the 10-yr yield couldn't be sitting at 1.8% for long. With the feds cutting down on bond buying and then raise the rate the interest rate has no where to go but up.

Historically 10-yr bonds yield average something like 6%, so grad Stafford loan rate will be sitting mostly near the 9.5% cap in the long run. So consider yourselves lucky having benefited a bit because those starting pharmacy school next year are going to be wishing they had the old 6.8% back.

 

[Dreamer716]

Last year they changed the student loans interest rates to one that is tied to 10-yr treasury note yield. For graduates, the Stafford loan rate is set to yield + 3.6%, with a cap of 9.5%.

Well, we all know that the 10-yr yield couldn't be sitting at 1.8% for long. With the feds cutting down on bond buying and then raise the rate the interest rate has no where to go but up.

Historically 10-yr bonds yield average something like 6%, so grad Stafford loan rate will be sitting mostly near the 9.5% cap in the long run. So consider yourselves lucky having benefited a bit because those starting pharmacy school next year are going to be wishing they had the old 6.8% back.

Do you have a number in mind for what the interest rate will be next year?

 

[NejixRockS]

Last year they changed the student loans interest rates to one that is tied to 10-yr treasury note yield. For graduates, the Stafford loan rate is set to yield + 3.6%, with a cap of 9.5%.

Well, we all know that the 10-yr yield couldn't be sitting at 1.8% for long. With the feds cutting down on bond buying and then raise the rate the interest rate has no where to go but up.

Historically 10-yr bonds yield average something like 6%, so grad Stafford loan rate will be sitting mostly near the 9.5% cap in the long run. So consider yourselves lucky having benefited a bit because those starting pharmacy school next year are going to be wishing they had the old 6.8% back.

I will be starting pharmacy school next year... god i hope it doesn't go as high as 9.5%

 

[xiphoid2010]

Do you have a number in mind for what the interest rate will be next year?

Nobody has a crystal ball, if I can predict it with certainty I would be rich. But if I had to guess, the feds will have stop all the QE and maybe just starting to touch the short term interest rate around May of next year when the 2015-16 rate is set. I don't think the feds will allow a sharp rise in rate too quickly, it the graduate stafford rate will likely be right around 6.8-7% next year.

Barring further economic down turns, it should eventually gets back up to 8-9% once the economy fully recovers. (Historical average 10-year treasur yields was around 7% during the 90's, and 5% in the 2000's before the great recession)

 

[a student]

Nobody has a crystal ball, if I can predict it with certainty I would be rich. But if I had to guess, the feds will have stop all the QE and maybe just starting to touch the short term interest rate around May of next year when the 2015-16 rate is set. I don't think the feds will allow a sharp rise in rate too quickly, it the graduate stafford rate will likely be right around 6.8-7% next year.

Barring further economic down turns, it should eventually gets back up to 8-9% once the economy fully recovers. (Historical average 10-year treasur yields was around 7% during the 90's, and 5% in the 2000's before the great recession)

So if I were to work this year, should I use my paycheck to pay back my current debt or save up to take out less next year?

 

[xiphoid2010]

So if I were to work this year, should I use my paycheck to pay back my current debt or save up to take out less next year?

Depending on your existing loan interest rate, most likely you are better off pay down current debt this year. You let your money sit there for a year, even if you find a money market fund that pays 1%, you will still lose at least another 1% of its value to inflation, mean while your existing loan interest is compounded for 1 more year. So unless the interest rate difference between your existing loan and next year's loan is huge, you are better off using your money now than let it sit.