Student loan interest rates are dropping!!!! We break down how soon to be students and current students can take advantage of these lower interest rates.
Each May Congress (not the U.S. Department of Education) sets student loan interest rates for the upcoming school year. The rate is based on the 10-Year Treasury notes. Good news...this rate has absolutely plummeted.
Here are the new rates based on the 10-Year Treasury yield of 0.70% as of May 12, 2020:
Anyone borrowing for school using Federal student loans between July 1, 2020 and June 30, 2021 can take advantage of these lower student loan interest rates.
If you are a current student with loans already you can potentially "refinance" your old Federal loans. Details for this as well as new students are below.
If you have the ability to, you can take the maximum amount you can get each semester between July 1, 2020 and June 30, 2021. Some of you may need to do this just to pay for tuition and cost of living.
However, many of you don't need 100% of the amount available to you...but that is where the secret comes in. Take it out even if you don't need it.
If you already have loans, they are at a much higher interest rate. So the strategy goes like this....over borrow, i.e. take out the max even if you don't need it. Then take the extra amount and use it to pay off your old loans that are at the higher interest rate.
You too can take advantage of lower student loan interest rates by over borrowing this semester. We are at all time lows for rates. Therefore, probability says rates will go up in the future. Thus, you can take out more than you need today and put it in the bank. Then next year when rates increase take out less loans and use the money you have in the bank to pay for tuition and cost of living.
If you have other debt such as credit card debt, over borrow on your student loans and pay off the credit card debt. Student loan debt is cheaper and you have more options. You may even want to do this for car debt as well.
Do not over borrow and then blow the money on stupid things you don't need!