Bad news for student loan borrowers: We just learned what interest rates on Federal Direct Loans are going to be for the next academic year, and, unfortunately, they’re going up.
Rates on loans issued for the 2017/18 school year will be as follows:
- 4.45% on Subsidized and Unsubsidized Direct Loans for undergraduate students (up from 3.76% in 2016/17)
- 6.00% on Unsubsidized Direct Loans for graduate students (up from 5.31% in 2016/17)
- 7.00% on Direct PLUS Loans for graduate students and parents of undergraduate students (up from 6.31% in 2016/17)
This rate change officially kicks in on July 1st, and is locked in for the life of any Direct Loan issued over the next year. The change does not affect any student loans borrowed in prior years, nor loans borrowed after June 30, 2018.
This 0.69% rate increase is fairly significant, and will likely cost a typical undergraduate borrower $200-$300 total over the life of his loan. It will be more costly to graduate student and parent borrowers, who have higher loan limits.
Despite the jump from last year’s near-historic low rates, borrowers in 2017/18 should not despair. The forthcoming 4.45% rate is still a bargain compared to student loan rates ten (6.8%) or twenty (8.25%) years ago, and, as long as you borrow wisely, the investment in your education will likely pay you back many times over in increased lifetime earnings and other immeasurable benefits.