This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Student Loan Rates May Rise Regardless of Politics: Fitch

NEW YORK ( bankingmyway.com ) -- Both President Obama and Republican party standard-bearer Mitt Romney support extending low-interest rate student loans. But regardless of whether that happens, student loans could still wind up being more expensive.

Currently, political wrangling on how Congress would pay for the bill that would extend student loan rates at their present levels of 3.4% threatens to scuttle any deal. The GOP favors taking it out of the health care budget while the Democrats want to raise taxes on small business owners, or by hiking taxes on wealthy Americans.

If no deal is cut, federally funded student loan rates would double to 6.8% on June 30 -- essentially a $6 billion tuition hike for financially embattled U.S. families.

Make no mistake, affordable student loan advocates aren't happy about the bickering.

"Political mudslinging over the $6 billion investment has taken this critical issue hostage and threatens to saddle students with even more unnecessary debt", notes Tiffany Dena Loftin, vice president of the Washington D.C.-based United States Student Association, which represents four million students on 400 U.S. college campuses.

But even if a deal is reached in Washington, there's no guarantee that college students won't be paying even more for student loans.

That's the consensus of a new white paper released by Fitch Ratings, which says that students and families may gain in the short term, but "regulatory uncertainties" may add to loan costs in the long run.

"A scheduled doubling of interest rates on subsidized undergraduate Stafford student loans could create a short-term opportunity for private lenders, although Fitch Ratings believes that regulatory uncertainty with respect to the student lending business, a dwindling number of lenders in the space, and longer-term interest rate dynamics would all likely result in little response from private lenders. Left with few alternative financing sources, future undergraduate students could face higher interest rates as a result."

Fitch notes that a higher rate environment could boost private lending to college-going students and their families. If rates did pop up to 6.8%, the firm says that banks and other lenders would surely swoop in and undercut the high rate to grab a larger slice of the burgeoning student loan market.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.46 0.00%
FB $78.97 0.00%
GOOG $558.40 0.00%
TSLA $203.34 0.00%
YHOO $44.28 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs