Relief is on the horizon for college students and their families. Interest rates on federal student loans have dropped as of July 1st.
Interest Rates on Federal Student Loans will drop by .37% for any new loans taken out on July 1 or later. That’s because Congress passed a bill tying the interest rate to the 10-year treasury note in 2013. This drop applies to federal loans taken out for the 2015-16 school year. That includes federal Stafford Loans, graduate Stafford Loans, and direct PLUS loans, which are available to parents and to graduate students, which are available to parents and to graduate students. The rates will be locked in for the life of the loan.
A 0.37% decrease can add up to big savings over the life of the loan. A college freshman who borrows the maximum amount allowed for a subsidized Stafford Loan ($5,500) will save about $117 over the life of the loan. A graduate student will save about $457 and a parent taking loans for a child will save about $916 over the life of the loan.

As mentioned, the rate is tied to the 10-year treasury auction, which is linked to the strength of the economy. It’s expected to keep rising, and some financial aid experts are predicting student loans rates will rise by as much as 1% per year for several years. Rates are capped at 8.25% for undergraduate, 9.5% for graduate, and 10.5% for Plus loans.

More than 40 million American are now paying back more than $1.2 trillion in student loans, with an average debt of nearly $30,000 per person. Graduates and young adults report they are unable to get loans to buy a home b/c of the impact on […]