There could be an interest rate hike coming as early as next month. The Federal Reserve Bank of Philadelphia President, Patrick Harker, said that the U.S. central bank’s meeting on March 14 & 15 looks like the opportune time for an increase. Provided that the job market momentum is steady, growth continues, and wages increase.
For student loan borrowers with a fixed interest rate, a possible hike won’t have any impact on their current monthly payments. For variable-rate student loans, where the interest rate can go up and down depending on the market, there will be a change. This would have the biggest impact on private student loan borrowers. These borrowers might want to look into switching to a fixed rate loan. That way, they can lock in the low, unfluctuating rate.
For new student borrowers, the interest hike will affect them regardless. Federal loans are tied to the 10-year Treasury note which factors in anticipated rate hikes over the next decade. Due to that fact and the expected increase in rates, students just taking out loans now and in the next few years can expect to see higher rates. The New York Times reported that student loan interest rates could go up one or two percentage points in the next few years.
While the rate was left unchanged last month—and it’s too early to see how President Donald Trump’s fiscal policies will affect the nation’s economic outlook— Harker cautioned that he didn’t want to “get behind the curve” when it comes to setting interest rates.
His colleague, John Williams, also publicly said that the March meetings of the Federal Open Market Committee should be considered for a potential rate move. Experts are saying there is about a one in four chance of a quarter-point increase in March.
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