Federal Student Loan Interest Rates Heading Up
Federal student loan interest rates will jump from 3.86 percent to 4.66 percent in the next academic year for undergraduate students. They’ll increase from 5.41 to 6.21 percent for some graduate loans.
Last summer’s Bipartisan Student Loan Certainty Act tied interest rates to 10-year Treasury note rates—meant to allow the rates to reflect the overall performance of the economy.
The solution was better than the alternative—if Congress hadn’t acted, rates would have skyrocketed. However, this year’s rates are already in spitting distance of interest rates prior to the new system—rates that many borrowers considered too high. As EdCentral.org reports:
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Last summer’s bill does cap the possible interest rate at 8.25 percent for undergrads and 9.5 percent for graduate students.
Interest rates are also capped at 10.5 percent on PLUS loans—loans parents and graduate students can take out in addition to what the government offers upfront. Those loans will jump to 7.21 percent in 2014-2015, up from 6.41 percent this year.
U.S. Senator Elizabeth Warren last week introduced legislation that would allow existing borrowers to refinance their student loans along the lines of current interest rates.
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