Federal student loan interest rates will rise in July

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About 41 million people in the United States have student loans.

PA

Students heading to college should prepare for an unexpected cost: Taking out federal student loans will cost more this fall than it did last year.

The Treasury Department announced that starting July 1, interest rates for new federal student loans will increase by 1.26% percentage points, according to the National Association of Student Financial Aid Administrators.

Here’s what that means for new borrowers.

Each spring, Congress sets student loan interest rates for the following academic year based on ratings from the 10-year Treasury auction that takes place in May, according to Bankrate, a financial guidance site. .

Starting July 1, interest rates on federal student loans will increase significantly and remain in effect until at least June 30, 2023, according to Forbes.

The 1.26% spike will raise undergraduate student loan rates from 3.73% to 4.99%, which translates to a 34% increase, according to current rates shared by the Ministry of Education. ‘Education.

For graduate students, interest rates on unsubsidized loans will increase from 5.28% to 6.54%, an increase of approximately 24%.

Rates for PLUS loans — designed for parents of undergraduate, graduate and professional students — will increase from 6.28% to 7.54%, an increase of about 20%.

“That’s going to be a pretty notable year-over-year increase,” Greg McBride, Bankrate’s chief financial analyst, told CBS News.

This is the largest percentage increase in student loan interest rates since 2013, according to the Washington Post.

Bankrate explained that federal student loans are fixed — “meaning the rate won’t fluctuate over the life of the loan.” It also means the the new rates apply only to loans taken out to pay for the 2022-23 academic year and do not affect existing federal loans. Private student loans will also not be affected by this change as rates vary from lender to lender.

New student borrowers won’t immediately feel the effect of soaring interest rates, as the pause in student loan repayments has pegged interest rates at 0% until August 31.

The spike also comes as millions of student borrowers await a decision from President Joe Biden on canceling student debt.

During an April 25 press briefing, White House press secretary Jen Psaki said the president would make a decision before the end of the current hiatus on student loan repayments.

This story was originally published May 18, 2022 12:20 p.m.

Cassandre Coyer is a McClatchy national real-time reporter covering the Southeast while based in Washington DC. She is an alumnus of Emerson College in Boston and joined McClatchy in 2022. Previously she has written for The Christian Science Monitor, RVA Mag, The Untitled Magazine and Suite.



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