The 2024 – 2025 school year will see a significant increase in federal student loan interest rates. The new rates will apply to loans disbursed between July 1 and June 30 and are based on the high yield from the last 10-year Treasury Note auction in May. The rates for undergraduate Direct Loans will be 6.53%, Graduate Direct Loans and Grad PLUS Loans will be 8.08%, and Parent PLUS Loans will be 9.08%. These rates have been steadily increasing over the years due to inflationary pressures and actions taken by the Federal Reserve to combat it. Compared to pre-pandemic rates, the new rates are almost 20% higher.
The calculation of federal student loan rates is determined by legislation passed by Congress. For example, Undergraduate Direct Loans are based on the 10 Year Treasury Yield plus 2.05%, while Graduate Direct Loans, Grad PLUS Loans, and Parent PLUS Loans are based on different percentages of the 10 Year Treasury Yield. It is important to note that these loans have rate caps in place to prevent rates from exceeding a certain amount. Despite the current rise in rates, there is still a possibility for rates to decrease for the 2025 – 2026 school year.
As interest rates continue to rise due to inflation and Federal Reserve actions, borrowers are questioning the reasons behind the high student loan rates. With the current economic situation, it is essential to monitor these rates and be aware of any potential changes that may occur. It is crucial for borrowers to understand how these rates are calculated and the impact they may have on their future loan repayments.
The increase in student loan rates reflects the overall economic conditions and the measures taken by the Federal Reserve to address inflation. While the rising rates may be concerning for borrowers, it is important to stay informed and plan accordingly for future loan repayments. By understanding the factors contributing to the rate increases, borrowers can make informed decisions about their student loans and financial planning.
For students and parents planning to take out federal student loans for the 2024 – 2025 school year, it is important to be aware of the new interest rates and how they are calculated. With rates on the rise, borrowers should carefully consider their financial options and plan accordingly for loan repayment. As the Federal Reserve continues to adjust rates to combat inflation, it is crucial for borrowers to stay informed and be prepared for any potential changes that may impact their student loan interest rates in the future.
