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Congress: You’ll pay more for your child’s college education July 11, 2014

Posted by hslu in Congress, Economics, Obama.
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Well, you can thank the US Congress for that. Beginning July 1, 2014, interest rates on student loans and parent loans will be raised by 0.8 percentage points. Untitled

Source: https://studentaid.ed.gov/types/loans/interest-rates#what-are-the-interest-rates-of-federal-student-loans

What was the rational behind the increase, you might want to ask, in light of the extremely low interest rate environment we have been experiencing in the past several years? For instance, the latest 30-year mortgage rate for Reston and Manassas is quoted at a little under 4% at Epic Funding, a local lending firm. Yet, parent loans charge 7.21% and student loans charge 4.66%. Since parents loans typically take 10 years to pay off, the comparable rate on the 10-year Treasury is considerably lower at just 2.6 percent.

The answer: Since the United States is broke with national debt closing on 17 trillion, Obama signed a bi-partisan bill into law on 8-9-2013 which linked student/parent loans to 10-year Treasury rate plus 4.6%.

There is more: when taking out a loan from the government, the poor parents are required to 4% upfront: 3% origination fee and 1% federal default fee. They have no choice because the fees are taken out from the loan when it is transferred to the college the student is attending.

Pretty amazing, don’t you think? When we take out a loan to buy a house, we pay 1% loan origination fee. The federal government charges the parents 3% for the privilege. It is simply ridiculous!

Well, before the new rates take effect on 7-1-2014, the Congress could have done something to lower the rates but they chose to ignore it. There wasn’t an open vote session on the floor because no congressmen or senator wanted to be seen as the one who raise rate on poor students and parents. They let the deadline pass and said nothing about the rate increase.

 

 

 

 

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