Federal interest rates cut

[Dr. Anonymouss]

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So the big news today is that federal interest rates have been cut down to 0%. So what does this exactly mean for an MS-0 who will be maxing out the 40k federal loan for medical school as well as utilizing the grad loan plus? Can someone who understands economics please elaborate on this for me. I am sure I am mistaken to believe that my medical school federal loans will have no interest.

 

[libertyyne]

Means very little. Your loans will still have interest. These interest rates are for banks getting loans from the fed. There may be some rate reduction. How much, and if is still a question up in the air.

 

[Tiran145]

Federal reserve rate is not federal student loan rate as stated above, otherwise student loans would be 1-2% instead of 7. Your rate will likely be a tad higher than what we have now.

 

[efle]

This might be good news for you in a few years when you refinance. For during school, they're still gonna gouge you, because they can.

 

[findoc]

Student loan interest on medical school loans is EXTREMELY high given the current level of interest rates and the low risk of default. Totally unfair. I wish I could say that student loan interest would be lower, but unfortunately not the case.

 

[CyrilFiggis]

Federal student loan rates are calculated based off the 10-year treasury bond interest rate plus an additional 3-4% for the administrative processing. The next year’s rate is calculated every July. Currently the rate is <1%. This is a market based interest. You’ll see that it’s down right now but that’s not because of the Fed, it’s because bonds are historically safe investments during times of recession/downturn and investors flood the market.

Long story short, if the economy stays weak through the summer, loans for the 2020-2021 academic year will be 1-2% points below the historical 6-7%. You can monitor the rate by googling “$tnx”.

 

[Dr. Death]

Completely unrelated to the federal interest rate cut is the fact that the president has put a hold on all federal student loan interest. So for the immediate future you won't accrue any interest.

 

[findoc]

Plunging Rates Spell Opportunity for Student-Loan Borrowers

As financial markets grapple with fast-moving developments, borrowers could see interest rates on student loans decline dramatically—likely to record lows.

www.wsj.com

The Fed Just Cut Rates to 0%. Here's What It Means for Mortgages, Student Loans, Credit Cards, and More

It's bad news for savers, better news for borrowers.

money.com

The Fed’s rate cut doesn’t directly affect borrowers who have already left school and are in repayment. (Those borrowers may see some relief from a policy announced Friday that waives the interest on federal student loans.) But it does mean people planning to take out student loans for the upcoming 2020-2021 academic year will get rates that are close to record lows.

Interest rates on federal loans are fixed over the life of the loan. And since 2013, the annual rates on federal loans are set each May, based on the results of the 10-year Treasury note. If student loan interest rates were set today based on recent 10-year Treasury yields, they would be about 3% for undergraduate loans and 5.5% for graduate students and parents.

By comparison, interest rates for the current academic year range from 4.53% for undergraduate borrowers to 7.08% for graduate and parent PLUS borrowers.

For those repaying loans, it is likely the Fed cut will drive down the rates offered by private lenders, which means you could get a lower rate by refinancing yours loans into a new private loan. Even before the decision to cut rates to zero, interest rates offered for refinancing were among the most competitive we’ve seen in years. (Note that there are cons to refinancing federal loans, especially in a period of economic uncertainty.)