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Breaking News: Student Loan Interest Rates Rise!

Breaking News Student Loan Interest Rates Rise
Shannon Vasconcelos

Written by Shannon Vasconceloson May 11th, 2023

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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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.

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