Federal Student Loan Interest Rates for the 2024-25 School Year: What You Need to Know
Are you a student or parent planning to take out federal student loans for the upcoming 2024-25 school year? If so, you’ll want to pay attention to the latest news on interest rates. Starting on July 1, 2024, federal student loan rates are expected to rise slightly more than 1%, affecting loans disbursed between July 1, 2024, and June 30, 2025.
The rates for federal student loans are determined by a formula that uses the high yield from the last 10-year Treasury Note auction in May. With the auction taking place on May 8, 2024, the new rates for all types of Direct loans can now be calculated.
For undergraduate Direct loans, the fixed rate for the 2024-25 academic year will be set at a certain percentage above the May 10-year Treasury yield. This change will impact all federal Direct student loans issued on or after July 1, 2024.
But who exactly will be affected by these new rates? If you’re planning to apply for federal Direct student loans as an undergraduate, graduate student, or parent, these changes will impact loans issued on or after July 1, 2024. However, any previous federal Direct loans you have will not be affected, as they have fixed rates for the life of the loan.
It’s important to note that you can’t get ahead of the game by taking out a federal loan now at the lower 2023-24 rates for the upcoming school year. Federal student loans for 2024-25 will only be dispersed starting on July 1, 2024, when the new interest rates apply.
So why are student loan rates rising in the first place? The rates are tied to Treasury yields, which have been on the rise since 2022. As long as the Federal Reserve maintains high interest rates to combat inflation, student loan rates will continue to increase. However, there are caps in place to prevent rates from rising indefinitely.
While it may be tempting to consider private student loans as an alternative, keep in mind that they generally come with higher interest rates compared to federal student loans. Private student loan interest rates can range from 4% to 18%, while federal Direct loans range from 6.53% to 8.08%, with PLUS loans at 9.08%.
As we look ahead to the 2024-25 school year, it’s essential to stay informed about the latest changes in federal student loan rates. While rates are expected to continue rising, there are measures in place to ensure that they don’t skyrocket. By understanding how these rates are calculated and how they may impact your financial situation, you can make informed decisions when it comes to financing your education.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice. The content is based on general research and may not be accurate, reliable, or up-to-date. Before making any financial decisions, it is recommended to consult with a professional financial advisor or conduct thorough research to verify the accuracy of the information presented. The author and publisher disclaim any liability for any financial losses or damages incurred as a result of relying on the information provided in this article. Readers are encouraged to independently verify the facts and information before making any financial decisions.