Interest rates on federal student loans may increase by 1 percentage point: ‘A fairly big jump,’ expert says

Federal student loans are set to become more expensive in the upcoming academic year as interest rates are likely to increase.

The rates are determined annually based on the 10-year Treasury note, which has been rising alongside the Federal Reserve’s efforts to curb inflation.

According to Mark Kantrowitz, an expert in higher education, federal student loan rates may increase by 1 percentage point for the 2024-2025 academic year.

This means that interest rates on undergraduate loans would rise to 6.5% from 5.5%, while graduate loans would increase to 8% from 7%.

Plus loans for graduate students and parents would also rise, from 8% to 9%.

These new rates would apply to all federal education loans issued on or after July 1, 2024.

However, existing loans will not be affected, as most federal student loan rates are fixed.

The changes only apply to federal student loans; private loans have their own, often higher, interest rates.

This potential rate hike is noteworthy because it could make it more challenging for students and families to finance their education.

It is important to note that these estimates are based on current projections, and the official new rates will be announced by the U.S. Department of Education in the coming weeks.