Student loan interest rates hit a 16-year high.
Federal education loans disbursed after July 1, 2024 will have new interest rates as updated by the government, with some loan types seeing their highest interest rates since the 2008-2009 academic year.
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Government funding for undergraduate studies will be paid at an interest rate of 6.53%, up from 5.5%. Interest rates on graduate loans will rise to 8.08% from 7.05%, and Parent PLUS Loans and Graduate PLUS Loans paid after July 1 will be charged 9.08% interest, 1.03% higher than the previous rate of 8.05%.
Federal education loans disbursed on or after July 1, 2024 will be subject to new interest rates, in line with the latest information from the government. Federal education loans disbursed on or after July 1, 2024 will be subject to new interest rates, in line with the latest information from the government. Getty
This rate applies to all loans through July 1, 2025. After July 1, 2025, a new rate will take effect. This rate can go up or down and is set annually by Congress.
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The last time interest rates on loans were above 6% was from 2006 to 2008, when they were 6.8%, according to the Federal Student Aid Administration. By 2009, they had fallen to 6%.
Borrowing rates have been cheaper in recent years, hitting a 16-year low of 2.75% in 2020-21, before steadily rising to 3.73% in 2021-22, 4.99% in 2022-23 and 5.50% in 2023-24.
Federal student loan interest rates are fixed, meaning the amount charged on the loan will not change for the life of the loan, meaning if you first took out a loan between July 1, 2020 and June 30, 2021, you will continue to pay 2.75 percent and will not be subject to the new interest rate for the following year.
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Those seeking to borrow from the federal government will not be able to avoid the new higher interest rates, as loans for the 2024-25 academic year must be taken out after July 1, but it is possible to further finance your education with private funds. However, private loans come with their own interest rates that are not set by the federal government, which are often higher and can fluctuate over the life of the loan.
The rising rates come as a recent three-year study by the Employee Benefits Research Institute (EBRI) and JPMorgan Asset Management found that student loan debt has a “statistically significant negative impact” on the amount workers can save for retirement.
Approximately 43 million Americans have federal student loan debt, with the average student loan debt being about $38,000.
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