Loans to pay for college are about to get more expensive:for the Biden administration to write off billions of dollars in debt for millions of student loan borrowers. That’s because interest rates on federal student loans will go up on July 1.
The Biden administration has extended the repayment pause on federal student loans, which locks interest rates in at 0% until at least August 31. That means borrowers won’t feel the impact of the interest rate increase right away. But fixed interest rates on federal student loans are by law based on the Treasury Department’s 10-year note auction in mid-May, so rates on new loans change every year, regardless of the pause. of payment.
For borrowers taking out new federal undergraduate student loans beginning in July for the 2022-2023 academic year, interest rates will be 4.99%, up from 3.73% for the 2021-2022 school year. Federal graduate student loan rates will be 6.54%, up from 5.28%.
Interest rates for federal PLUS loans, which can be obtained by eligible graduate or professional students enrolled in at least half-time programs, as well as eligible parents of dependent students enrolled in at least half-time undergraduate programs, will be 7.54% . compared to 6.28%.
While student loan rates remain relatively low, those taking out new federal student loans will see the highest fixed interest rates for federal undergraduate, graduate and PLUS loans beginning in the 2018-2019 academic year.
“It’s going to be a pretty big year-over-year increase,” said Greg McBride, chief financial analyst at Bankrate.com.
Fixed interest rate increases on new federal student loans come as Americans grapple with skyrocketing prices in multiple sectors. The cost of groceries has risen more than 10%, the fastest annual rate in 40 years, andmore than 30% year after year. And rents are up more than 17% nationally on average from a year ago, according to Realtor.com.
“Whether you live on campus or off campus, you’re probably going to be priced much higher than you were a year or two ago,” McBride said. “Such as [inflation] is straining household budgets across the country, it’s likely to affect student budgets as well.”
While student loan payments are still on hold through August 31, saving some 40 million borrowers about $5 billion a month in interest payments, borrowers are waiting for the Biden administration to make a decision on cancellation of student loan debt.
The White House has said officials will make a decision on canceling student loan debt or extending the pause again.is seriously considering paying off at least some student loan debt. But details about the path the administration will take are still unclear.
The president has alsoor more in student loan debt, despite pressure from some members of his own party to do so.