Interest rates rise to 5.5% on new federal student loans


If you take out federal student loans to pay for your education next year, they’re about to get more expensive.

The interest rate on direct federal undergraduate student loans — which are determined annually by Congress — will drop from 4.99% to 5.5% for loans disbursed on or after July 1, 2023, a door has confirmed. -word of the Ministry of Education. The rate will only apply to new loans and is fixed for the life of the loan.

The 5.5% interest rate applies to direct subsidized and unsubsidized undergraduate loans. Interest rates for undergraduate borrowers haven’t reached 5% since 2019. Existing federal loans have not earned interest since the pandemic payments pause and interest took effect in 2020. It should be completed this summer.

Prior to this, unsubsidized loan rates had not exceeded 5% since 2013, the last year they had a separate rate for subsidized loans.

Graduate student borrowers will also see their loan rates increase from 6.54% to 7.05% last year. The prices on More loans – which can be subscribed by parents on behalf of their children, or by graduate and professional students – will also increase from 7.54% to 8.05%.

While it’s generally a good idea to compare rates from various lenders before taking out a loan, student loans are a bit different. You may find a better interest rate with a private lender, but federal student loans come with advantages that might prove more valuable than a lower rate.

If you qualify for federal student loans and can avoid taking on more debt to pay for your education, here are a few reasons why it’s generally a good idea to stick with Uncle Sam.

1. Loan forgiveness

2. Better terms of interest

Although interest rates on federal student loans remain the same for the life of the loan, private student loans often come with variable interest rates, which can increase over time. This can complicate your repayment planning and cost you more in the end.

With federal loans, not only do you keep the same interest rate, but you won’t have to pay interest on subsidized loans while in school.

Subsidized loans are intended for borrowers who demonstrate financial need. The government covers the interest charges on these loans if you are in school at least part-time, for the first six months after leaving school and during periods of postponement, such as if you choose to return to school or if you need to suspend payments. due to financial circumstances.

3. Flexible repayment options

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