A Look at the Student Loan Interest Rates for Fall
College students this fall likely will save some money on their federal student loans because of declining interest rates.
Starting July 1, the loans that millions of students rely on to finance their higher education hopes will drop by about half of a percentage point. The new rates, calculated by the advocacy group The Institute for College Access & Success, are:
- 3.76 percent for subsidized and unsubsidized Stafford loans for undergraduate students, a dip from 2015-16’s 4.29 percent
- 5.31 percent for Stafford loans taken out by graduate students, a drop from 5.84 percent
- 6.31 percent for Parent and Graduate PLUS loans, a drop from 6.84 percent.
Borrowers in the mid-1990s faced higher interest rates of more than 8 percent, the website FinAid shows.
Subsidized Stafford loans, which so far were issued to more than 5.5 million recipients in 2015-16 according to the Federal Student Aid office, are given to undergraduate students who demonstrate financial need. The interest for these loans doesn’t start accruing until a student leaves her college. Unsubsidized Stafford loans are available to both undergraduate and graduate students no matter their financial status. Nearly 5.4 million undergraduate and 1.3 million graduate students received these loans in 2015-16. For undergraduate students, the maximum amount they can take out in Stafford loans is $31,000 for dependent students and $57,000 for independent students or dependents whose parents couldn’t obtain PLUS loans. The Graduate student limit on Stafford loans is set at $138,500 (or $224,000 for students in some types of medical programs), which includes the loans taken out as undergrads.
Parent PLUS loans are taken out by the parents or guardians of undergraduate students. The loan amounts are limited to the cost of attending a school after all other loans and scholarships are calculated, and can range from several thousand dollars to six-digit figures. Roughly 3.4 million Americans owe more than $70 billion for these loans, which are issued to parents no matter their income or debt load. In recent years these loans were criticized for exposing parents with modest incomes to high debt levels. The U.S. Department of Education briefly put limits on who could borrow these loans in 2011, but those were loosened in 2014 after advocates argued on behalf of low-income parents who would otherwise be unable to put up the money to fund postsecondary educations for their children.
Graduate PLUS loans, available to students attending graduate programs, also have come under fire of late because they can be large loan amounts but are also eligible for the federal government’s various loan forgiveness programs.
Since 2013, these interest rates are set based on the going rate for the 10-year Treasury note plus a few percentage points depending on the type of loan. With the Federal Reserve keeping key interest rates low, borrowers can look forward to historically lower loan rates.
For information on student loan rates, see TICAS’s chart that captures other key details.