It can be confusing to figure out interest rates on student loans because the rates keep changing. Congress passed a law last year tying the federal student loan interest rates to the financial markets. This led to lower interest rates last year. The question many new borrowers are asking is what about this year?
We are starting to get some answers. The Consumer Financial Protection Bureau (CFPB) posted information indicating that interest rates on new federal student loans are expected to jump this July. These rates are not set in stone yet, so borrowers should stay tuned, but the CFPB estimates that rates for undergraduate Stafford loans will increase from 3.86% this past year to 5.09% starting on July 1, 2014. The rates for graduate Stafford loans will likely increase from 5.41% to 6.64%. Rates for PLUS loans, according to the CFPB estimates, are likely to increase from 6.41% this past year to 7.64% for new loans on July 1, 2014.
The CFPB also provided information about how higher rates translate into higher payments for borrowers. You can get more information based on your own circumstances using the CFPB Paying for College tool.
We will post more information once the final rates for next year are available. There will be a Treasury bond auction next month and that rate will set the new federal student loan interest rates.
These are the estimates for federal student loan interest rates. Rates for private student loans are not set by law. Instead, the lenders set rates for private loans and unlike federal loans, these are often variable rates.
