How interest rate is decided

If you want to get on the bad side of someone talk to them about interest rates.  Try to explain to them why their interest rate is 6.8% while their neighbors is 3.4%.  Usually this conversation turns to them accusing your company and the government of making money off the poor and how much money Student Loans collected in interest the previous year.  Typically these people also aren’t amused by the 0.25% interest rate reduction for Direct Debit.

Here is what it comes down to.  Congress sets interest rates, these rates are set by the Treasury Bill every year.  Also if your loan is a Parent PLUS it is different than a Stafford.  If your loan was taken out in 2004 it is different than 2007.  If you have a subsidized loan it is different than it being unsubsidized.  Your interest rate depends on the year it was taken out and the loan type.  Also if they are Title IV Loans that are Federally owned, your servicer doesn’t make a cent off your interest.  They are paid for servicing your loans and helping you payoff them off, no matter how much interest that is with.

Interest stinks and I tell anyone they always have the right to look for another way to pay off their loan with us and get something to replace it with a lower rate (such as a home equity).  Just know the best way to change this system is to consult with your congressman as this is where the decision originates.