College students and their families can expect to pay more as they borrow for the fall semester.
Starting this Saturday July 1st 2017, interest rates will rise on new federal loans for 2017-2018.
Rates were set based on the Treasury Department’s May 10 auction of 10-year notes. For new loans disbursed from July 1, 2017, to June 30, 2018, undergraduates will pay 4.45 percent. That’s an increase from this year’s rate of 3.76 percent.
Graduate students can also expect to pay higher financing costs after Saturday.
They will pay 6 percent for a direct unsubsidized loan — which begins accruing interest as soon as the borrower takes out the loan — an increase from 5.31 percent this year.
Finally, rates on direct PLUS loans, which both graduate students and parents of undergrads can use, will rise to 7 percent from the current 6.31 percent.
The increases don’t apply to Private Student Loans
Last year, the average college graduate owed $37,172, up 6 percent from 2015, according to data from Student Loan Hero.
Students currently in college already estimate that they’ll owe a median of $30,000 to $39,999 by the time they graduate, according to a recent survey of 1,040 undergraduates by College Ave Student Loans.
Total student debt in the United States is now over $1.4 trillion — the majority of which is from federal loans.
An undergraduate who borrowed $25,000 at this year’s rate of 3.76 percent would pay $5,032 in interest over 10 years, according to NerdWallet’s student loan calculator.
With the rate increase, a student who borrows the same amount next academic year at 4.45 percent can expect to pay almost $1,000 more in interest.
“The financial impact of this increase is on the order of a few dollars a month on a 10-year repayment plan for every $10,000 borrowed,” said Mark Kantrowitz, vice president of strategy for college and scholarship search site Cappex.com.
“This increase doesn’t affect existing loans, just the ones that are disbursed starting July 1,” he said.
Student Loan Hero: https://studentloanhero.com/
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