Create your very own Auto Publish News/Blog Site and Earn Passive Income in Just 4 Easy Steps
The new interest rates on federal student loans for 2024-25 have increased by more than a full percentage point.
Federal student loan interest rates are fixed interest rates for the life of the loan. New interest rates apply to loans paid between July 1st and June 30th.
Interest rates are based on the high yield of the most recent May 10-year Treasury Note auction, which took place on May 8, 2024.
The interest rates on the 10-year Treasury note are influenced by a short-term interest rate called the federal funds rate, which is set by the Federal Reserve Board. The Federal Reserve Board has kept this interest rate high to control inflation, which remains stubbornly above the Federal Reserve Board's 2% target.
The federal funds rate remains at a two-decade high after the Federal Reserve Board increased it by a total of 5 percentage points since March 2022. The Federal Reserve Board is unlikely to cut interest rates before the fall, which is after the interest rates are set for federal student loans in 2024-25.
The interest rates on private student loans and old fixed-rate federal student loans will not be affected by the change in interest rates on new federal student loans.
Student Loan Interest Rates for 2024 – 2025
The new interest rates for 2024-25 federal student loans disbursed on or after July 1, 2024 are:
- 6.533% for Federal Direct Stafford Loans for Students
- 8.083% for Federal Direct Stafford Loans for Graduates
- 9.083% for Federal Direct Grad PLUS Loans
- 9.083% for Federal Direct Parent PLUS loans
This is an increase of 1.035% compared to the previous year and 3.783% compared to the record low reached in 2020-21 during the pandemic.
Interest rates from previous years
This table shows how interest rates have increased significantly during the pandemic.
|
Direct Student Loans |
|||
|---|---|---|---|
Interest rate formula for new federal student loans
Federal student loan interest rates are set based on a formula that adds a fixed margin based on the type of loan to the high yield from the last 10-year Treasury bond auction in May. The margins are as follows:
- High Yield +2.05% for Federal Direct Stafford Loan for Undergraduate Students capped at 8.25%
- High yield + 3.60% for the Federal Direct Stafford Loan for graduate students, capped at 9.50%
- High Yield +4.60% for Federal Direct Grad PLUS Loan capped at 10.50%
- High Yield +4.60% for Federal Direct Parent PLUS Loan capped at 10.50%
The high yield on the 10-year Treasury note was 4.483% for the May 8, 2024 auction. This results in the following new interest rates:
- 6.533% for the Federal Direct Stafford Loan for undergraduate students, up from 5.498%
- 8.083% for the Federal Direct Stafford Loan for graduate students, up from 7.048%
- 9.083% for the Federal Direct Grad PLUS Loan, up from 8.048%
- 9.083% for the Federal Direct Parent PLUS loan, up from 8.048%
Effects of rising interest rates
The increase in interest rates will result in an increase in the monthly student loan payment of approximately $5.20 to $5.54 per $10,000 borrowed over a 10-year repayment term compared to last year's interest rates.
These tables show the impact of the interest rate change on the monthly student loan payment for each type of federal education loan.
Here are direct student loans:
|
Direct Student Loans |
Monthly payment per $10,000 |
||
|---|---|---|---|
Here are the federal direct graduate loans:
|
Monthly payment per $10,000 |
|||
|---|---|---|---|
Here are PLUS loans for graduates and parents:
|
Monthly payment per $10,000 |
|||
|---|---|---|---|
Current interest rates for private student loans
Private student loan interest rates depend on the type of loan and the creditworthiness of the borrower (and co-signer, if applicable). They also depend on the repayment term.
Interest rates for private student loans range from approximately 4.5% to 16.5% (fixed) and 5.5% to 18% (variable).
Interest rates for personal refinance loans range from approximately 5% to 11% (fixed) and 5% to 11% (variable).
Interest rates on private student loans typically change monthly. You can find a list of private lenders and interest rates here.
Create your very own Auto Publish News/Blog Site and Earn Passive Income in Just 4 Easy Steps
