Attention high school seniors, continuing college students, and all of their parents: In news coming out of the U.S. Department of the Treasury today, we now know what federal student loan interest rates will be for the upcoming school year. For students and parents borrowing loans between July 1, 2022 and June 30, 2023, interest rates will be as follows:
- Subsidized and Unsubsidized Direct Loans for undergraduate students: 4.99% (up from 3.73% in 2021/22)
- Unsubsidized Direct Loans for graduate students: 6.54% (up from 5.28% in 2021/22)
- Direct PLUS Loans for graduate student and parents of undergraduate students: 7.54% (up from 6.28% in 2021/22)
These rates represent an increase of more than 1% over last year’s rates, costing the average undergraduate student loan borrower up to an additional $500 over the life of next year’s loan, based upon dependent undergraduate annual loan limits ranging from $5,500 to $7,500 per year. Unfortunately, the rate increase could cost undergraduate parent and graduate student borrowers fully funding a year of schooling through federal loans ten times that amount.
Note that these new interest rates apply only to loans borrowed for the 2022/23 academic year. Previously borrowed federal student loans are unaffected, and the existing interest-free forbearance of federal loans remains in effect until August 31 (barring future possible extensions).
As always, students and parents should attempt to reduce borrowing as much as possible, by
saving in advance,
maximizing scholarship funding, and utilizing interest-free
tuition payment plans. Despite recent temporary expansions of the Public Service Loan Forgiveness program and on-going debt cancellation discussions within the federal government, many obstacles still stand in the way of any large-scale student loan forgiveness program, and forgiveness cannot be counted upon as an effective repayment strategy. Instead, choose your college carefully, budget sensibly, and
borrow wisely, and your college investment is likely to pay off well into the future.
