Students and Parents to Pay Higher Loan Rates
College students were sad to see it will cost them more to borrow, as interest rates on federal student loans rose for the second year in a row.
Undergraduate students can expect to pay 5.04% in interest on new Stafford loans instead of the current 4.45%. Graduate students will see the interest rate on new Direct loans climb from 6% to 6.59%. And parents who take on federal debt to help their children pursue a degree will be looking at paying 7.59% annually instead of 7%.
The federal government resets rates on student loans every year, based on the spring rate of the Treasury Department’s 10-year notes, plus a fixed margin. New rates took effect July 1.
For new loans made between July 1, 2018, and June 30, 2019, the specific rates are:
- Undergrad Direct Stafford Loans are 5.045%, up from 4.45% (subsidized and unsubsidized).
- Grad Direct Stafford Loans are 6.595%, up from 6% (unsubsidized).
- Parent Plus Direct Loans are 7.595%, up from 7%.
The interest rates are fixed for the life of the loan. With subsidized loans, the federal government pays the interest that accrues while the student is in school, during the six-month grace period after graduation, and during any loan deferment periods. With unsubsidized loans, the borrower is responsible for paying the interest during these periods. Only undergraduate students are eligible for subsidized loans, and eligibility is based on demonstrated financial need.
