Many colleges in the country are gearing up to a good start in approaching fall semester. College education costs are soaring and could cost over $50,000 a year depending on the college. Student loans are at an all-time high of over $1 trillion surpassing the nation’s total credit card debt. The issue is on the top of nation’s political agenda.
Available student loans fall into three main categories: student loans guaranteed by the Federal government and available from banks and other institutions; direct Federal student loans; and private student loans.
Interest rate of the federally guaranteed and the direct Federal loans are set by the congress from time to time. The Federal Government provides incentives to financial institution for providing these loans including a total payment of the loan amount back to the institution in the event of a loan default. The most recent intervention by the Federal Government resulted in extending the existing student loan rate of 3.4 percent. This affects a total of $6.7 billion existing student loans as well as any future student loans from the two more popular programs. However, the interest rate on a private institution loan may vary on many factors and provides worst interest rate among all available programs.