By Eliza Haverstock | NerdWallet
Federal student loan interest rates will reach record heights for the 2024-25 school year, increasing the cost of college for people who will take out student loans, according to a May 14 Education Department announcement.
Here’s how 2024-25 federal student loan interest rates will compare to 2023-24 rates:
- Undergraduate direct loans will have a 6.53% interest rate, up from 5.50%.
- Graduate and professional direct loans will have an 8.08% interest rate, up from 7.05%
- PLUS loans, available to parents and grad students to fill in funding gaps, will have a 9.08% interest rate, up from 8.05%.
Since 2006, all federal student loans have fixed interest rates. Undergraduate direct loan interest rates haven’t been this high in 16 years, since the 2008-09 academic year. (The standing record is 6.8%, for loans disbursed between 2006 and 2008.) Interest rates on direct graduate loans and PLUS loans have never been this high.
The upcoming federal interest rate hikes may also affect students already dealing with major FAFSA errors and delays, adding another layer of uncertainty about the true price of college in 2024-25. For some students, private student loans with lower interest rates may look more attractive — but private loans come with fewer borrower protections and no forgiveness options.
Rising rates increase total cost of college
Each spring, the government sets federal student loan interest rates for the academic year ahead. The rates are effective July 1 and will apply to all borrowers who take out new federal student loans for the 2024-25 school year. Federal student loans have fixed interest rates, so they won’t change during the repayment period — which typically lasts from 10 to 25 years, depending on your repayment plan. (If you’re already repaying older student loans, this interest rate hike doesn’t affect you.)
Ultimately, higher interest rates will make college more expensive for the millions of college students and…
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