ANAHEIM HILLS, CA / ACCESSWIRE / June 30, 2017 / Beginning this Saturday, July 1st, college students and their families can expect to pay more for their loans this upcoming fall semester. Interest rates will be rising on federal student loans for the 2017-2018 school year.
This year’s undergraduate rate of 3.76 percent will increase to 4.45 percent for new loans distributed from July 1, 2017 to June 30, 2018. The U.S. Treasury Department set these rates based on the May 10 auction of 10 year notes.
Undergrads are not the only students to be impacted by this rate increase. Graduate students will also be paying higher financing costs after this weekend. The 5.31 percent they were paying for a direct unsubsidized loan this past school year will increase to 6 percent. These loans begin accruing interest as soon as the borrower takes them out.
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Direct PLUS loan rates are also expected to rise. These are loans that both the parents of undergrads and graduate students can use. The interest rate for PLUS federal student loans is currently 6.31 percent, but this rate will rise to 7 percent this Saturday. None of these increases will apply to student loans obtained through private entities.
In 2016, college graduates owed about $37,000 on average. According to data from the Federal Reserve Bank of New York, this statistic is up 6 percent from 2015 reports.
The total amount of student debt in the U.S. is now over $1.4 trillion- the majority being from federal loans. According to a recent survey of over 1,000 undergraduates, current college students have estimated that they will owe a median of $30,000 to $39,000 by the time of their graduation.
As reported by Forbes, an undergrad student borrowing $25,000 at the current rate of 3.76 percent would pay just over $5,000 in interest over the next 10 years. With a 4.45 percent interest rate, this same student can expect to pay close to $1,000 more in interest over the same span of time.
Mark Kantrowitz, strategy for college and scholarship search expert, stated, “The financial impact of this increase is on the order of a few dollars a month on a 10-year repayment plan for every $10,000 borrowed.”
Rates may be up for undergrads and graduate students alike, but the increase will not affect existing loans. This change will only affect loans disbursed July 1 and beyond.
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SOURCE: Student Doc Solutions
