What started out as a rumor is now looking more like reality. The chances of an interest rate hike coming this month at more than 50%, according to multiple sources.
While it has been widely speculated that the Federal Reserve would raise interest rates at the US Central Bank’s next meeting on March 14-15, Bloomberg’s world interest rate probability tool reports that the possibility is now up to 52%— up from 34% just one week ago and 40% last Friday.
In fact, Federal Reserve Chair Janet Yellen told the Senate last month that waiting too long to raise rates would be “unwise.” She pointed to the growing economy, strong job market, and rising prices as indicators that the time for a rate hike is imminent. And the Dallas Fed President Rob Kaplan told reporters in February that the rate hike would come “sooner than later” and later clarified that it would be “in the near future.”
The Fed is currently predicting three rate hikes in 2017. They predicted four hikes in 2016, but only ended up raising them once in December. In addition, many believe that uncertainty about President Donald Trump and his fiscal policies make a rate hike this month unlikely.
So, what would a rate hike look like for student loan borrowers? For those with loans at a fixed interest rate, nothing would change for them, while borrowers with a variable rate would see a change in their monthly payments based on interest rates going up and down. It might be a wise move for these borrowers to shop for a fixed rate loan in an attempt to lock in the lowest rate possible. Keep in mind, this advice mostly pertains to private student loans whereas federal loans come with fixed interest rates.
For those just looking into taking out loans to pay for school in the fall, these students will likely see higher rates of anywhere from one to two percentage points.
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