The U.S. Department of Education has announced that the interest rates on federal student loans for the 2024-2025 academic year will be higher than in previous years. The interest rate on federal direct undergraduate loans will be 6.53%, the highest rate in at least a decade, while graduate students will face an 8.08% interest rate and parents and graduate students taking out Plus loans will have a 9.08% interest rate. These rates are significantly higher than the current rates and haven’t been as high in over 20 years.
Experts are concerned that the rise in interest rates could complicate the Biden administration’s efforts to address the student loan crisis and provide relief to borrowers. While recent debt relief measures have helped many borrowers, new students will now be faced with more expensive loans that could burden them for decades. The higher rates may make it more difficult for students to afford their education and could exacerbate the existing issues surrounding student loan debt.
All federal education loans issued on or after July 1, 2024, will be subject to the new higher interest rates. Families will not be able to avoid the rate increase by borrowing ahead of the deadline, as loans for the 2024-25 academic year must be taken out after July 1. However, borrowers with existing federal student loans from previous academic years do not need to worry, as the rates on those loans are typically fixed and will not change.
It is important to note that the rate changes apply only to federal student loans. Private loans typically have their own, often higher, interest rates. Borrowers should carefully consider their options and the implications of taking out federal versus private student loans, especially in light of the rising interest rates on federal loans.
Overall, the increase in interest rates on federal student loans for the upcoming academic year is concerning for both current and future borrowers. The higher rates could make it more challenging for students to afford their education and could have long-term financial implications. It is important for borrowers to stay informed about their loan options and to consider the potential impact of taking out loans with higher interest rates.
