Article
Of the $1.5 trillion in current outstanding student loan debt, over 92% is in federal student loans—and for good reason; lower interest rates. Private student loan interest rates are significantly higher than federal student loan rates and can reach as high as 14%. Additionally, private loans don’t offer nearly as many flexible payment options and protections found in federal loans. Despite that, more than half of borrowers that took out private student loans did not fully exhaust their federal loan eligibility.
With all the talk in politics and the markets, it can be easy to lose sight of the impact these decisions can have later in life. Interest rates are historically low and getting lower. For loans disbursed between July 1, 2019 and June 30, 2020 rates have dropped by .52% for Undergraduate and Graduate Direct Stafford Loans and for parent and graduate student PLUS loans.
Source: Office of Federal Student Aid, U.S. Department of Education
To put the effect of this into context, let’s look at an example. In the table below we have three students who each graduated with student loan debt totaling...
financial planning
