![CollegeInvestor_1280x720_Federal_Student_Loan_Interest_Rates_Set_To_Rise Interest rates on new student loans set to rise this fall](https://cdn.thecollegeinvestor.com/wp-content/uploads/2022/05/CollegeInvestor_1280x720_Federal_Student_Loan_Interest_Rates_Set_To_Rise.jpg)
Federal student loan interest rates are fixed for the term of the loan. Interest rates for new federal student loans are set on July 1 each year based on the high yields of the previous 10-year Treasury auction in May.
Here are the new interest rates for federal student loans for the 2023-2024 school year that will run after July 1, 2023:
- 5.498% for Federal Direct Stafford Loans for Undergraduates
- 7.048% for Federal Direct Stafford Loans for Graduate Students
- 8.048% for Federal Direct Alumni PLUS loans
- 8.048% for federal direct parent plus loans.
The increase in half-point rates continues a trend that began early in the pandemic after interest rates hit historically low levels.
Rising federal student loan rates were affected by the Federal Reserve’s attempt to curb inflation by raising interest rates. The Fed has raised interest rates by a total of 5 percentage points since March 2022.
Interest rates for private student loans and old fixed-rate federal student loans are not affected by changes in new federal student loan rates.
New Federal Student Loan Interest Formula
The interest rate is set based on the high yield of the 10-year US Treasury auction plus a certain amount of margin depending on the type of loan. The margins are:
- High Yield on Federal Direct Stafford Loans for Undergraduates + 2.05% (Capped at 8.25%)
- High Yield on Federal Direct Stafford Loans for Graduate Students + 3.60% (up to 9.50%)
- High Yield on Federal Direct Grad Plus Loans + 4.60% (capped at 10.50%)
- High Yield on Federal Direct Parent Plus Loans + 4.60% (Capped at 10.50%)
of High Yield on 10-Year Government Bonds It was 3.448% at the May 10, 2023 bid. So the new interest rates are:
- Federal Direct Stafford Loans for Undergraduates Rise from 4.993% to 5.498%
- Federal Direct Stafford Loans for Graduate Students Rise from 6.543% to 7.048%
- 8.048% for Federal Direct Grad Plus Loans, up from 7.543%
- 8.048% for federal direct parent plus loans, up from 7.543%
Related:
Predicting Future Student Loan Interest Rates
interest rates over the past few years
This table shows how interest rates have increased significantly during the pandemic.
Federal Direct Stafford Loan (Undergraduate) |
Federal Direct Stafford Loans (Graduate Students) |
Federal Direct PLUS Loan (Alumni and Parents) |
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Impact of interest rate fluctuations
Rising interest rates will increase monthly student loan payments by about $2.50 per $10,000 borrowed, assuming a 10-year repayment period, compared to last year’s rates.
These tables show the impact of changing interest rates on monthly student loan payments for each type of federal education loan.
Start with Direct Stafford Student Loans for the most common undergraduates.
Federal Direct Stafford Loan (Undergraduate) Interest Rate |
Monthly payments per $10,000 over a 10-year term |
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Grade Direct Student loans are also undergoing major changes.
Federal Direct Stafford Loan (Graduate Student) Interest Rates |
Monthly payments per $10,000 over a 10-year term |
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Alumni PLUS loans and parent PLUS loans also saw significant cost increases.
Federal Direct PLUS Loan (Alumni and Parents) interest rate |
Monthly payments per $10,000 over a 10-year term |
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---|---|---|---|
Suspension of payments and interest waivers
Interest rates on eligible federal student loans have been temporarily set to zero beginning March 2020. Federal student loans in the direct loan program and FFELP loans held by or on behalf of the US Department of Education are accruing no new interest.
Federal student loan repayments are scheduled to resume in September 2023. Therefore, new federal student loans for the 2023-24 school year could be waived for one to two months of interest if paid back in July or August before the suspension. And the interest waiver will end. However, most of these loans will not benefit from interest forgiveness as they will be disbursed after September 2023.
Related: Can the President Permanently Extend Student Loan Suspensions?
Current Interest Rates on Private Student Loans
Interest rates on private student loans depend on the type of loan and the creditworthiness of the borrower (or co-guarantor, if any). It also depends on the repayment period.
Interest rates for private student loans range from approximately 4.5% to 15% (fixed) and 5.0% to 15% (variable).
Interest rates for private refinancing loans range from 4.5% to 12% (fixed) and 5.0% to 12% (variable).
Interest rates for private student loans usually change every month. You can find the best student loan interest rates here.