Ripped from the Headlines: Wait…Some Good News Courtesy of COVID?

You heard me right! There is one piece of particularly good news for EVERYONE when it comes to college and COVID-19: the cost of borrowing at all levels has dropped precipitously this year. When so many families are struggling to afford college, the recession, home savings, the interest rate rollbacks, and more all contributed to record low borrowing percentages.

According to an article in CNN Business, rates across the board will be significantly lower than they were just one year ago. The APR on a Stafford loan this coming year will be right around 2.75%, down from 4.53% this year. For grad students, the borrowing rate will be 4.3%, down from 6.08% a year ago, and PLUS loans (the loans taken out by parents to meet ‘unmet need’) will drop down to 5.3%, down from 7.08% just one year ago.

For those of you who want the nitty-gritty on how this all works, annual borrowing rates are tied to yields on the 10-year treasury notes sold each May. With yields on the 10-year notes hovering around 0.69%, we, the borrowing community, are seeing the benefits of record low rates passed on to us. Just one year ago, the same 10-year note closed at 2.24%.

Does this mean you should take extra money from the available PLUS loan that was offered to you? That depends on your particular situation (this would be a good time to talk to Trevor about this!). But having access to a parent loan around 5% is unprecedented. Don’t expect this to be around next year (though, if our national economy does not recover quickly, there may be one more year of epicly low rates) so do the math and figure out if taking extra cash makes sense for your family’s efforts.

More good news? You got it. Anyone holding a current federal loan has had the interest rate reduced to 0% through September 30th as part of the CARES Act. Any payments made during this time goes completely to paying down the principal of the loan.

OK, so you are waiting for the bad news, right? Here it is: this amazingly low borrowing rate is only for new loans originated between July 1, 2020 and July 1, 2021. It does not permit refinancing of older federal loans at this low rate into a new federal loan (though you can refinance the loan into a privately held loan, with certain federal protections removed).

For access to the original article, please follow this link: https://www.cnn.com/2020/05/13/success/federal-student-loan-rates/index.html