Reply to involuntary collections of student loans

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]What is the interest rate on government student loans? Think government borrowing rate is about 4.5%. Is interest on student loans much higher and if so why?[/quote]

Current rates, which are set by Congress:

Undergraduate Students:
Direct Subsidized Loans: 6.53% (for those demonstrating financial need). 
Direct Unsubsidized Loans: 6.53% (no financial need requirement).

Graduate or Professional Students:
Direct Unsubsidized Loans: 8.08%.

Parents and Graduate/Professional Students:
Direct PLUS Loans: 9.08%.

These rates are fixed for the life of the loan. They cannot be refinanced with the federal government. You can refinance with a private lender, but you lose all the protections of federal student loans (eg, PSLF program, income based repayments, etc.)[/quote]

Why is the rate for undergrads 50% higher than the government’s cost of borrowing? is this meant to cover admin cost and defaults?[/quote]

To pay for the contractor loan servicing companies and debt collectors. The government has to pay extra to these companies to buy back any loans in default.[/quote]

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