Attention high school seniors, continuing college students, and all of their parents: In news coming out of the U.S. Department of the Treasury yesterday, 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, 2023 and June 30, 2024, interest rates will be as follows:
- Subsidized and Unsubsidized Direct Loans for undergraduate students: 5.50% (up from 4.99% in 2022/23)
- Unsubsidized Direct Loans for graduate students: 7.05% (up from 6.54% in 2022/23)
- Direct PLUS Loans for graduate student and parents of undergraduate students: 8.05% (up from 7.54% in 2022/23)
These rates represent an increase of approximately 0.5% over last year’s rates, costing the average undergraduate student loan borrower an additional $200 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 2023/24 academic year. Previously borrowed federal student loans are unaffected, and the existing interest-free forbearance of federal loans remains in effect until 60 days after the Supreme Court decision on student loan debt relief expected in the coming weeks (or 60 days after June 30, whichever comes first).
As always, students and parents can minimize borrowing by
saving in advance,
maximizing scholarship funding, and utilizing interest-free
tuition payment plans. While much recent attention has been paid to the prospect of student loan forgiveness, as is evidenced by the legal challenges to the Biden Administration’s debt relief program, many obstacles stand in the way of any large-scale student loan cancellation program. 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.
