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, 2024 and June 30, 2025, interest rates will be as follows:
- Subsidized and Unsubsidized Direct Loans for undergraduate students: 6.53% (up from 5.50% in 2023/24)
- Unsubsidized Direct Loans for graduate students: 8.08% (up from 7.05% in 2023/24)
- Direct PLUS Loans for graduate students and parents of undergraduate students: 9.08% (up from 8.05% in 2023/24)
This is the highest rate we’ve seen on the Subsidized Stafford Loan since the 2007/08 school year, and the highest rate we’ve
ever seen on a fixed rate Federal PLUS Loan. As anyone shopping for a mortgage lately will know, interest rates across sectors have increased precipitously over the past couple of years, and student loan rates move in line with other rates in the economy.
These new student loan rates represent an increase of more than a full percentage point over last year’s rates, costing the average undergraduate student loan borrower an additional $400 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 2024/25 academic year. Previously borrowed federal student loans are unaffected, as are loans borrowed after July of 2025. Future borrowers can only hope that inflation will continue to slow and that the Federal Reserve Board will begin to decrease interest rates soon.
As always, students and parents can minimize borrowing by
saving in advance,
maximizing scholarship funding, and utilizing interest-free
tuition payment plans. In light of rising loan rates, it’s become more important than ever to choose your college carefully, budget sensibly, and
borrow wisely.
