For most of the nearly $1.4 trillion in U.S. student loan debt, the Federal Reserve interest rate hike means nothing -- for now.
That's because 92.5 percent of those loans are from the federal government and carry a fixed rate.
The rate on federal student loans is determined by Congress. Under current law, rates are set by a formula based on the auction of 10-year Treasurys each year for loans disbursed on July 1 through the following June 30.
So while rates on existing student loans will stay the same, those on student loans next year could rise on expectations that the government will have to borrow more to fund President-elect Donald Trump's plans to cut taxes and boost infrastructure spending. In fact, those expectations have already pushed 10-year Treasury yields higher.
"When you look at what's happened to long-term rates since the election, it might seem inevitable that rates on government student loans taken out after June 30, 2017, will be higher than they are today," said Stephen Dash, CEO of Credible.com, an online marketplace for lenders that offer student loan refinancing.
If 10-year Treasury yields stay at 2.6 percent, rates on new federal student loans will be about 0.9 percent higher than they are today. (See table below.)