If you or your child plan to borrow federal student loans for the upcoming school year, we have some important news for you. We now know what student loan interest rates will be for the 2019/20 academic year.
Interest rates for the Federal Direct Loan program are set each year based on the 10-Year Treasury Note rate as of June 1. The Treasury Department just held its last T-Note auction scheduled prior to that June 1 date, so rates are now locked in.
Without further ado, interest rates for the 2019/20 school year will be:
- Subsidized and Unsubsidized Direct Loans for undergraduate students: 4.529%
- Unsubsidized Direct Loans for graduate students: 6.079%
- Direct PLUS Loans for graduate student and parents of undergraduate students: 7.079%
These rates represent about a half a percent decrease in rates over loans borrowed for the 2018/19 academic year—the first decrease in federal student loan rates in three years! Given that federal undergraduate loans are capped at $5,500-$7,500/year (depending upon year in school), the rate decrease will cut the lifetime cost of a typical undergraduate loan by about $150. Graduate students and parent borrowers fully funding a year of schooling with federal student loans could save up to around $1,500 based upon this rate drop. Falling rates are always good news for borrowers, but students and parents should always remember to maximize all scholarship/grant opportunities, college savings, and monthly payment plans before looking to borrow.
The lower interest rates apply to new federal loans borrowed for academic periods beginning between July 1, 2019 and June 30, 2020. The rates are fixed for the life of these loans, and do not affect loans borrowed prior to or after the 2019/20 school year.