Larisa Elizondo graduated from the University of Michigan debt-free, but getting a law degree required she take out about $160,000 in student loans.
“There was a point where I actually had to get a second job waiting tables at a bar to be able to make everything, because, you know, my student loan payments were $1,150 a month,” Elizondo said.
Now, as an established lawyer, Elizondo feels like she’s making enough to finally start a family, but rising interest rates are causing some Americans anxiety. On Wednesday, the Federal Reserve hiked interest rates just under one percent, the largest increase in nearly 30 years, to tame inflation.
“I’ve been trying to figure out, should I refinance, do something to refinance the other private loans?” Elizondo said.
Today, Elizondo still owes about $40,000 in private and $30,000 in federal student loans. The interest rates on federal loans are fixed, but the rates of most private student loans are variable, meaning rising interest rates make them more expensive to pay off.
“When the Fed increases interest rates, private student loan interest rates go up, as well as, you know, auto loans and mortgages and things like that,” said Cody Hounanian, the executive director at the Student Debt Crisis Center.
Experts at the NerdWallet, a website offering free financial advice, agree. They note that rising interest rates, not directly related to the increase by the Federal Reserve, will also make loans more expensive for those taking out federal student loans for the upcoming school year.
“So new federal student loan borrowers are going to see their own increased interest rate increase beginning July 1. Next year’s interest rates are nearly double what they were two years ago,” said Anna Helhoski, a student loan expert art NerdWallet.
Senator Elizabeth Warren (D-Mass.) is among a group of lawmakers asking President Joe Biden to cancel federal student loan debt at $50.000 for every borrower.
“It would wipe out all the debt for about 85% of those who have student loan debt, and it would make the debt manageable,” Warren said.
The White House has said the president has already authorized about $25 billion in “targeted” relief for borrowers in the last 18 months. Advocates are still hopeful he will do more by offering broad relief to everyone with federal student loans.