Interest rates on new federal student loans will rise nearly 1%
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The interest rate on new federal student loans is rising.
The government sets annual interest rates on the debt once a year, and the percentage is based on that 10 year treasury bills.
Despite the upward trend, the rates remain low in historical comparison, said university expert Mark Kantrowitz.
Although the U.S. Department of Education has not officially announced the new rates for the 2021-2022 academic year, Kantrowitz has calculated what the new numbers are likely to be. Kantrowitz estimates that the interest rate on federal student loans will rise by 0.98%.
“It’s the fourth lowest rate in ten years,” he said.
And because of the pandemic, the interest rate on most federal student loans was fixed at zero through September.
Here’s what you need to know about the change.
As the federal student loan rate will rise 0.98%, the rate on new Stafford student loans will rise to 3.734%, down from 2.75% for 2020-2021. This will increase monthly loan payments over a 10-year term from $ 95.41 to $ 99.99 for every $ 10,000 of debt borrowed that academic year, Kantrowitz said.
For PhD students, Kantrowitz predicts that Stafford loans will feature an interest rate of 5.284%, compared to 4.3% now. That would Increase the monthly loan payments on a 10 year repayment Maturity to $ 107.46 from $ 102.68 per $ 10,000 debt borrowed, he noted.
Finally, he expects PLUS PhD and Parent Loans to have an interest rate of 6.284%, a 5.3% increase. As a result, monthly loan payments will increase from $ 107.54 to $ 112.45 for every $ 10,000 of loans over a 10-year term, Kantrowitz said.
All federal education loans issued after July 1, 2021 are subject to the new rates.
You cannot try to bypass the rate hike by borrowing before this deadline. Loans for the 2021-2022 academic year must be taken out after July 1st.
Don’t worry about loans you took out for previous years of study: federal student loan interest rates are fixed and the rates on existing ones won’t change.
Borrowers Can Kantrowitz ‘ calculator on his website to enter their loan details and see what they end up owing.
He advises students not to borrow more money than they expect to earn in the first year after college. The average starting salary is $ 50,000, although there is a wide range between professions.
President Joe Biden has said he supports the granting of $ 10,000 student loans per borrower, and there are currently reports from the Department of Education and Justice on whether the president has legal authority to cancel the debt without Congress.
Forgiveness has never been more likely to happen. “You can’t rely on anything until the legislation comes into force,” said Kantrowitz.
“Students shouldn’t borrow more than they need in anticipation of the debt being canceled,” he added.