We do not expect the increase in rates to materially influence undergraduate student demand at most institutions in academic year 2014-2015, as students have already committed to the fall semester. The impact on graduate enrollment, a student body that relies more heavily on federal loans, could be negative but is somewhat less clear, as many programs have rolling admissions policies and therefore less specific admissions deadlines.
Fitch believes rising rates may draw more scrutiny of college affordability. According to the
Tempered increases in student charges could negatively impact net tuition and fee revenue, which is already been pressured by increasing budget support for financial aid at many non-profit private colleges and universities. Additional information on increased financial aid can be found in Fitch's recent commentary, "Fitch: Increased Discounting Dims Revenue Growth Prospects at Some Private Colleges & Universities."
Interest rates on federal loans for academic year 2014-2015 increased effective
The recent student loan rate increases stem from a resolution reached last year that tied interest rates on government-sponsored loans to the 10-year U.S. Treasury note plus a flat rate, depending on the type of loan. The rates are locked through the life on the loan and are capped. Undergraduate
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
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