home Finance Increasing Interest Rates Of Student Loans

Increasing Interest Rates Of Student Loans

I was fortunate enough to finish my undergraduate degree without any student loan debt. That could have saved me from the hassles of getting cash advance for paying student loan. However, I then made the unfortunate decision to go to law school. Except at the time it was not an unfortunate decision. It was 2007, new lawyers were pulling down $160,000 per year and law school was most definitely in vogue. It was the golden ticket. Add to that the fact that I was going to have my law school paid for by my generous parents. So, I turned down a 90% scholarship at an unranked law school to go to the best school that accepted me.

Then, in 2008 the rug was pulled out from under me. (And everyone else). See, I had told myself and pretty much everyone I’d never have gone to law school if I had to pay for it myself. So perhaps I was naive and spoiled, but nonetheless I understood that I didn’t want student loans. Unfortunately, by the time I had to sign up for the loans I was halfway through law school. I thought about dropping out and maybe going back when I could pay for it. But that would be a real easy conversation in an interview in early 2009. So I bit the bullet and hoped it would all work out fine.

I had a job when I graduated at a small firm that I worked at during law school. I have since moved on to a new job in private wealth management. I love the fact that I have a great work-life balance and don’t have to bill hours. But I am a little upset that I don’t need the law degree for what I do. Anyway, my real gripe is not with the loans, but the interest rate. I am actually in pretty good financial shape for someone with just under $76,000 in student loans. I am looking to buy a house or condo. And that’s where my issue with student loans emerges.

You see, I was pre-qualified for a mortgage for a Fannie Mae HomePath property of approximately $250,000 with as little as 3% down and no mortgage insurance for 40 (not 30) years at a fixed rate of 3.5%. 40 year money for 3.5%! If you know anything about the history of interest rates, you know that’s incredible. I just checked the 30 year US Treasury Yield and it was 3.16%. So basically, I can get a mortgage for very close to what the United States Government can borrow at.

But the student loans? Can I refinance them at a lower rate? No. Can I replace the federal student loans with a private one at a lower rate? No. Can I consolidate them and lower the rate? No. I am stuck at a weighted average of roughly 7.6%. I had an 800+ credit score when I applied for the mortgage and I can’t do better than 7.6% on the student loans. I’ve done everything right financially and I am stuck with a high rate. I can only guess that the government relies on people like me-people who will pay to keep their credit worthiness up- to subsidize all those that will not be able to pay. That’s unfair and wrong. Every other loan I’ve ever heard of can be refinanced. Even if there were a 10,000 penalty, I’d take that refinance if I could get a market rate.


David Robson

David Robson is the founder of Complus Alliance. He has been writing about different topics for almost 10 years. He’s main focus is delivering quality insights to a wide array of audience.