Higher interest rate for students is due to take effect on January 1, according to the Student Loan Management Association of America (SLMA).
The new rate is for a maximum of 20 percent and the SLMA said in a statement that students who borrow $1,000 or more annually will have the new rate applied to their interest rate.
The SLMA, a trade association for lenders, said it also had announced plans to raise the maximum credit limit for student loans to $1 million.
Students are also now eligible for student loan forgiveness at their home state of Illinois.
The SLMA has been pushing for the new interest rate, which it called “a major step in the right direction” in terms of student loan relief.
The association said in an October 1 press release that the new rates would “help address a number of issues,” including the increased cost of borrowing, the increased debt burden for some students, the lack of affordable housing and affordability of tuition.
Earlier this month, SLMA President and CEO David R. Rifkin said that the interest rates were the first of their kind to be applied to student loans.
“We are pleased to announce that the SLMAs first annual rate increase will go into effect on December 31, 2019, which will increase the maximum student loan interest rate by 20% for undergraduate students, 20% at community colleges and community universities, and 25% for graduate students,” he said.
Students who borrow more than $1.4 million will now see the new 20 percent rate applied, and those who borrow less than $100,000 will have it reduced to 10 percent.
Students who have been paying a loan off their federal student loans will see the rates increased to 12 percent.
In a statement, SLMAS President and Chief Operating Officer Matthew G. Miller said, “Students are the future of our economy and the future that our country depends on.
The higher the cost of a student loan, the more student loan debt our nation will have to bear.
This new interest rates offer an important opportunity for students to save and access the relief that they need to help pay for their education.”
SLMA President Rifkins added, “This new rate increase is a first step in a long process to make it easier for students and borrowers to borrow and afford their education.
Our members and students will continue to work hard to make the transition to a low-cost student loan system a reality for all students and help ease student debt burdens for our nation’s most vulnerable.”
Slavin said the SLMMA would continue to update the SLMPA’s loan rates as the process to raise interest rates was underway.
According to the SLAMA, the SLA will be issuing a report to the public on the interest rate changes on January 2.
SLMMA President David Rifkins office said in the statement that the organization would be working with SLMA partners, including the Consumer Federation of America, the American Association of University Women, the National Association of Realtors, the Association of Community Colleges, and the Association for Public and Land-Grant Universities, “to inform policymakers about the impact of these interest rate increases and the steps that are being taken to address the concerns of student borrowers.”
The Consumer Federation is an umbrella group that represents more than 20,000 business, professional, and consumer organizations, and includes the National Consumer Law Center, the Federal Trade Commission, and other trade associations.
Source: SLMA press release, SLMLA release, Student Loan Association of the United States (SLA) press release