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Student Loan Rates Double: That’s Good News for Students.

Written by Gary North on July 2, 2013

On July 1, the interest rate on student loans doubled from 3.4% to 6.8%. This only applies to future loans. This is the best news that has hit the student loan market in years.

This will restrict the number of students who will take out loans. This is exactly what the market needs. In a market in which it is possible to earn a bachelor’s degree by distance learning for about $15,000, total, any student loans at all are economically suicidal. Yet there are almost $1 trillion worth of these loans outstanding.

The students cannot escape these loans by declaring bankruptcy. Congress changed the bankruptcy law to favor the bankers on this point.

Congress is now facing the “terrible” threat that fewer students will sign up for these loans. This is supposed to be an intolerable burden on the American public. Taxpayers will not be called on to subsidize these loans by offering loan guarantees to banks. This will slow down the sub-prime loan market, which is exactly what the student loan market is.

Today, Democrats blame Republicans, and Republicans blame Democrats. Both sides say they want to get interest rates down to where they were before. But these were subsidized rates. These were government boondoggles. Both parties are rushing to extend the boondoggles again, thereby trapping students in needless debt for needless degrees which can be bought for $15,000 through distance learning, rather than for the students’ parents to pay $50,000-$250,000 for useless liberal arts degrees that will not get the graduates’ decent jobs.

Be thankful for small favors. The interest rate has doubled on these loans, and maybe a few students will now decide not to burden themselves with needless debt for useless degrees.

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11 thoughts on “Student Loan Rates Double: That’s Good News for Students.

  1. Matthew N Gooseneck says:

    I am afraid most students don’t or will not know the difference in the interest rates.

  2. If this indeed does limit the number and volume of student loans, maybe it'll pressure colleges to get a little more competitive price-wise. This student loan program is one of the major props keeping tuition high. Just like in the housing market…maybe it's 2006 now in the college tuition market. College tuition has gotten to be a bubble, maybe this is a pin. But again, maybe Matt above is right–18-year-olds might not understand the difference in paying back a 50k loan at 3.4% or 6.8%. Sigh.

  3. I lived the Student Loan/Student Loan Default horror story. The interest on my loans was EIGHT PERCENT. That's a percent point over what these kids will be expected to pay on their loans AFTER the rates double.

    Dr. North is correct – if there is less Student loan money "out there" perhaps within a few Semesters Colleges will cease with Luxury Dorms, Health Spas, Gourmet Meals, "Life Style Experience" and return to their Core Task – Education.

    Who knows? Perhaps the ultimate beneficiary of an increase in Student Loan interest rates will be the American Education System itself.

  4. Blair Franconia, NH says:

    When I went to college in 1980, I did it on a scholarship. Not with student loans.

  5. J. Allison says:

    I went to college in the late 60's when tuition was affordable($200 per semester) We didn't have all of these luxuries that they have on campus today. The emphasis was on learning. I lived in a dorm built in 1939 with 2 room mates until 2nd semester when I was moved to a new dorm where I shared a room with one person. I ate at the dining hall and took what they served or went hungry. In my second year, I moved off campus, took on a full time job and a full time schedule and, although it wasn't easy, I made it through and graduated. Student loans generally were not available. Students these days have an entitlement mentality due to the liberal/progressive govt. I have no sympathy for anyone who is not willing to work to secure their future and I wouldn't want to hire someone who wasn't willing to work to help pay for his/her education. Just my 2cents worth.

  6. shagphil says:

    Allison, couldn’t agree with you more! Well said.

  7. mrsgunnut10 says:

    Everytime I hear about how much some students are in debt, I get to wondering. How many of those dollars were actually spent on Education ? You hear and read stories about " Binge Parties" , Beach Parties at Spring Breaks, Street riots after some type of "Game" was won. Parents and Students should come clean and tell the American Tax Payers, who, at sometime or another will be asked to "FORGIVE" these Loans. The "Students" can't seem to find jobs so they can pay off their Loans, but, are they really looking for a job??? Sorry if I stepped on some TOE's but " THE TRUTH " needs to be told.

  8. chamuiel says:

    Well, lucky you.

    Not everyone qualifies for a Scholarship, now do they?

  9. Blair Franconia, NH says:

    They do if they know where to look. I'd suggest your local Lions Club. That's who I got mine from.

  10. The economic problems we are havnig today go back to the 1800's. At that time, only fanatical, unelectable third party candidtes wanted paper money, government subsidies, and inflation. Now this radical insanity is viewed as normal. Williams Jennings Bryan spoke of the gold standard as "America being crucified on a cross of gold." Nowadays, we know that the cheap money people are the ones crucifying America. Even the EPA has announced its penchant for crucifixions.

  11. There are many online colleges and universities offering their education services at a very affordable price just like http://goo.gl/13slDy and for that reason many students completing their studies with getting any loans.