Saturday, October 24

Want a Student Loan? Now’s the Time!

The U.S. economy has drastically changed ever since the onset of the coronavirus pandemic. Businesses shuttered, teleworking at an all time high, are all part of the “new normal” we are living through. The lack of economic growth has called for the Federal government to enact very low interest rates in order to spur economic growth and prevent an economic crisis like we had in 2008.

What do low interest rates mean? The cost of borrowing any money is now extremely low compared to before because the government wants people to borrow money to spur economic growth. This low interest rate includes student loans, which intrigues a large percentage of the Vanderbilt student body. The interest rates on student loans is at a rate of  2.75%, much lower than a typical rate in any other year. Rates tend to run between 4 and 6 percent for federal student loans. These are historically low and if there is a time to take one out it would be now. Provided that you need one of course.

There are certain things to keep in mind with these low student loan rates. The rate of 2.75% only applies to undergraduate federal student loans; therefore, private loans or graduate student loans are not able to be taken out with this low interest rate. In fact, private loans are almost always higher than the federal student loan rate. If you take out an unsubsidized loan, the interest is being temporarily set to 0% through December 31, 2020, so your unsubsidized loan will not accrue the 2.75% interest rate until after the end of this year. If you have a subsidized loan, the 2.75% interest rate will only start accruing when you finish your studies.

Low interest rates on student loans change how many people advise students to pay for their studies. Even a 0.5% difference in interest rates can be the difference between a few hundred or even a few thousand dollars in accrued interest in the future.  If you were adverse to getting a loan to pay for school in the past, perhaps now may be the opportunity to borrow money and avoid having to take one out next year when the interest rates increase because the interest rates will not stay at 2.75% forever.

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