Federal student loan interest rate will rise to highest level in 12 years

Borrowing to pay for college is about to get more expensive: The interest rate on new federal student loans for undergraduates during the upcoming 2024-25 academic year will be the highest in 12 years.

Borrowing to pay for college is about to get more expensive: The interest rate on new federal student loans for undergraduates during the upcoming 2024-25 academic year will be the highest in 12 years. The federal student loan interest rate will be 6.53% for undergraduate students, up from 5.5% for the current year. The interest rate has not been that high on any undergraduate loans since the 2012-13 school year. Graduate students will see an 8.08% interest rate this coming academic year, up from 7.05%. And PLUS loans, which are available to both parents and graduate students, will come with a 9.08% interest rate, an increase from 8.05%. The rates for graduate students and parents have not been as high since before July 2006, when the government started setting fixed rates for student loans. Prior to that, most federal student loans had variable rates. The higher student loan interest rates will make it more costly for borrowers to pay back their debt – and could cause a problem for President Joe Biden who is working to win over as many young voters as he can before the November election. To be clear, the president does not set the federal student loan interest rates himself. The rates are set annually and are based on the 10-year Treasury note auction held every May. The increase isn’t a total surprise since the Federal Reserve has kept the nation’s benchmark interest rate at a 23-year high as it waits for inflation to cool.