As the Federal Reserve is believed to be raising rates another quarter-point this week — making the rate 2.5 percent — I wonder if it will stop to consider the effect that its interest rate hikes have had on the $1.5 trillion student loan market and its 44 million borrowers.
Fed Chair Jerome Powell has major influence over the cost of student loans, since they are based on the 10-year Treasury note, plus an add-on of 2.05 percent.
The rate hike expected Wednesday would make new student loans even more obscene, at 4.6 percent.
In 2011-13, when interest rates were effectively zero and the 10-year Treasury note was approximately 1.5 percent, student loans were charging 3.5 percent — and they will stay at that rate for life for the majority of borrowers.