How do interest rates affect student loans?

    Published: 06-16-2009
    Views: 16,004
    Justin Draeger with the National Association of Student Financial Aid Administrators explains how interest rates affect student loans.

    Justin Draeger: Hi, my name is Justin Draeger, I am a spokesperson for The National Association of Student Financial Aid Administrators. Today I am going to be talking to you about student loan consolidation.

    Host: How do interest rates affect student loans?

    Justin Draeger: After July 1, 2006, Federal Stafford Loans are the most common forms of Federal Student Loans, now have a fixed interest rate. But before that if you have loans priors to July 1, 2006, you probably have a variable interest rate that changes annually based on T-bills that are auctioned off by the government. Having an interest rate that is going up or down will affect how much you pay and how much you ultimately owe. Rising interest rates means that your monthly payment will go up and in the end you will pay more for your loan, interest rates that are going down means that you will be paying less monthly and then also at the end of the year, you will pay less in interest rates.