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Breaking News: Student Loan Interest Rates Drop!

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Shannon Vasconcelos

Written by Shannon Vasconceloson May 12th, 2020

I came to College Coach with close to 10 years of experience in college financial aid offices. I began my career at Boston University, where I counseled students and their parents on the financial aid process and reviewed undergraduate financial aid applications. At Tufts University, where I served as assistant director of financial aid, I developed expertise in the field of health professions financial aid. I was responsible for financial aid application review, grant awarding and loan processing, and college financing and debt management counseling for both pre- and post-doctoral dental students. I have also served as an active member of the Massachusetts Association of Student Financial Aid Administrator’s Early Awareness and Outreach Committee, coordinating early college awareness activities for middle school students; as a trainer for the Department of Education’s National Training for Counselors and Mentors, educating high school guidance counselors on the financial aid process; and as a volunteer for FAFSA Day Massachusetts, aiding students and parents with the completion of online financial aid applications.
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by Shannon Vasconcelos, former financial aid officer at Tufts University In a welcome reprieve from the sea of bad news we’ve been drowning in lately, today we have some good news for student loan borrowers.  We now know what federal student loan interest rates will be for the 2020/21 school year, and… drum roll, please… those interest rates have dropped to historic lows! For students and parents borrowing loans between July 1, 2020 and June 30, 2021, interest rates will be as follows:
  • Subsidized and Unsubsidized Direct Loans for undergraduate students: 2.75% (down from 4.53% in 2019/20)
  • Unsubsidized Direct Loans for graduate students: 4.30% (down from 6.08% in 2019/20)
  • Direct PLUS Loans for graduate student and parents of undergraduate students: 5.30% (down from 7.08% in 2019/20)
These rates represent a drop of 1.78% from last year’s rates, saving the average undergraduate student loan borrower up to $750 over the life of their loan, based upon dependent undergraduate annual loan limits ranging from $5,500 to $7,500 per year. Undergraduate parent and graduate student borrowers fully funding a year of schooling through federal loans could save ten times that. The Federal Reserve Board, in the wake of the coronavirus emergency, has decreased interest rates to historic lows in an effort to stimulate the economy, and college loan rates have responded in kind. This rate drop is likely a small silver lining to college students and parents who may be struggling with reduced income and devalued investments in this difficult time. While we advise families to minimize education borrowing by saving for college, utilizing payment plans, applying for financial aid, and considering colleges with low sticker prices or offering generous scholarships, more affordable student loan options are certainly a welcome option to add to families’ tuition payment arsenals. Our College Finance Experts


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