For the first time since 2014, all federal student loan interest rates will increase by 0.69% on July 1st, 2017 (see table below).
Did You Know: There is a cap on how high federal student loan rates can go? Congress set the following limits—8.25% for undergraduates, 9.5% for graduate loans, and 10.5% for PLUS loans.
Then and Now: Federal Student Loan Interest Rates
|Graduates Direct Unsubsidized Loan||5.31%||6.0%|
|PLUS Loan Graduate and Parents of Undergraduates||6.31%||7.0%|
What Determines the Rates?
Federal student loan rates are determined annually by the 10-year Treasury note auction. However, when the economy is performing well, the Federal Reserve tends to increase rates.
How Does This Impact Me?
If you currently have federal student loans, this will not impact your interest rate. Your previous loans have a fixed interest rate, which means the rate will stay the same until you’ve paid off the loan. The above interest rate changes will only impact you if you receive a new federal student loan and it’s disbursed on or after July 1st 2017.
It’s important to note that the 0.69% increase in the interest rate does add up over time. For example, if a student borrows $5,500 for their freshman year and repays the loan within 10 years, they would pay $220 extra in interest with the new rates in comparison to last year’s rates.
Understand Borrow Limits for Your Loan.
Borrowing limits for federal student loans are most strict for dependent undergraduate students under the age of 24. These students can borrow up to $5,500 freshman year, $6,500 sophomore year, and $7,500 junior and senior year.
The limits placed on federal student loans are meant to protect students from accumulating too much debt. The best rule of thumb is that your total student loan debt should be less than your estimated annual salary for the career you choose.
Already Have a Student Loan?
If you have a student loan, you should continue to login regularly to track your loan. Make sure you contact your loan servicer immediately to notify them of school enrollment and address changes and if you need assistance with your repayment plan.