According to the Associated Press, student loan interest rates were expected to go up last week, and the hikes could potentially foreshadow future increases.
The AP reported that the increase stems from laws passed last year by Congress and President Barack Obama, which tie rates to the financial markets.
According to the news outlet, interest rates have gone from 3.86 to 4.66 percent on undergraduate Stafford loans, while graduate student loans have gone up from 5.41 percent to 6.21 percent. Additionally, interest rates on Plus loans for parents have gone up from 6.41 percent to 7.21 percent.
It was reported that for every $10,000 borrowed, the average borrower under the hike will pay back about $4 more every month when they begin paying back the money.
“If the economy continues to improve, however, these kinds of rate hikes could continue,” the AP reported. “Congress stipulated that the rates for new loans be reset annually, but that borrowers keep the rate they were given for the life of the loan.”
Some people are concerned, because interest rates continually rise. However, it should be noted that the deals made by the Obama administration did include caps. According to the AP, rates will not top 8.25 percent for undergraduates, while graduate students will not pay rates higher than 9.5 percent and Plus loan rates top out at 10.5 percent.
What Should I Do If I Cannot Afford to Pay My Student Loans?
This is unfortunate news for people who are already struggling to make student loan payments. Regrettably, student loans are very hard to discharge through bankruptcy—although it can be done if someone shows a great financial hardship.
Additionally, you can still free up money for payments by filing for Chapter 7 or Chapter 13 bankruptcy. A bankruptcy triggers an ‘automatic stay’ that puts an end to credit card collection attempts and can end lawsuits brought on by lenders.
Keep in mind, through a Chapter 7 bankruptcy, you can discharge other debts like medical bills and credit card debt, which can help free up money to make student loan payments.
If you have questions about student loans and bankruptcy, contact our Washington DC and Maryland bankruptcy lawyer now for a free consultation.
Law Firm of Kevin D. Judd
Judd’s Judgment: As of March 2014, more than 40 million Americans had outstanding student loan debt.