Education Dept. announces highest federal student loan interest rate in more than a decade (2024)

FAQs

Education Dept. announces highest federal student loan interest rate in more than a decade? ›

Federal student loan interest rates highest in more than a decade. The U.S. Department of Education announced that the interest rates on federal student loans for the 2024-25 academic year is 6.53% for undergraduates, up from 5.5% for the 2023-24 school year.

For graduate and parent borrowers, costs were raised to their highest levels since 2006, with interest rates set over 9% (Figure 1). These higher interest rates could cost students over $3 billion in additional interest for loans taken out in this year alone.

The total U.S. loan debt has more than doubled in the past 15 years. It has increased by: 127% in 15 years. 42% in 10 years.

During the 1990s, two major federal initiatives spurred student borrowing, which rose from $16.4 billion to $37.5 billion over that decade.

If you don't have an excellent or even good credit score, your interest rate will be higher than that of someone with a better score. You have private student loans: Federal student loans have several protections, like deferment, forbearance and income-driven repayment plans.

The benchmark interest rate in the United States was last recorded at 5.50 percent. Interest Rate in the United States averaged 5.42 percent from 1971 until 2024, reaching an all time high of 20.00 percent in March of 1980 and a record low of 0.25 percent in December of 2008.

The interest rate among all federal student loans increased by 8.02% – up from 6.36% – between the 2022-2023 and 2023-2024 academic years. The average federal loan interest rate since 2006 is 5.99%. The undergraduate interest rate is 5.50%. The current undergraduate interest rate is up 10.2% YoY.

During the late 1970s and early 1980s, when interest rates on mortgages were in the double digits, the interest rate on student loans was fixed at eight percent. This meant that student loans were an excellent deal.

How many people actually pay off their student loans? ›

20% of U.S. adults report having paid off student loan debt. The 5-year annual average student loan debt growth rate is 15%. The average student loan debt growth rate outpaces rising tuition costs by 166.9%. In a single year, 31.5% of undergraduate students accepted federal loans.

Student loan borrowers by balance owed

Most borrowers actually have relatively small debt balances. More than 30% of borrowers, for example, owe less than $10,000, while less than 8% of borrowers owe more than $100,000.

Federal student loan interest rates are reviewed and determined based on 10-year Treasury notes, plus a fixed rate of interest. They're reset on July 1 of every year. Rates are set by federal law (not the Department of Education).

You can reduce your interest rate by 0.25% by signing up for auto pay. This won't change your monthly payment amount, but you may end up paying less in the long run.

Key Points. Interest can make student loans more expensive, while inflation can make that debt harder to manage alongside other bills. Paying off some of your debt during your studies could ease the burden later on and save you money on interest.

Learn more about private student loans

The federal student loan interest rate for undergraduates is 6.53% for new loans taken out for the 2024-25 school year, effective from July 1, 2024 to June 30, 2025. Federal rates for graduate student loans and PLUS loans are higher — 8.08% and 9.08%, respectively.

A fixed rate will not change for the life of the loan. If your loan was disbursed before July 1, 2023, you likely have a different interest rate.

1994-95: Change in the cap on the Stafford Loan from 9.0% to 8.25% and the cap on the PLUS Loan from 10.0% to 9.0%. 1992-93: The cap on the PLUS Loan was changed from 12.0% to 10.0%, and the interest rate was reduced by 15 basis points.