Make us your home page
Instagram

What to know about rising student loan interest rates

Interest rates on federal student loans are set to rise July 1. Still, experts say, federal loans remain a good deal.

What to expect. First, the rate increase affects only loans disbursed on or after July 1 of this year. Loans taken before then will not be affected.

For new loans, the rate on undergraduate Stafford loans will climb to a fixed 4.66 percent from 3.86 percent.

On Stafford loans for graduate students, the rate will jump to a fixed 6.21 percent from 5.41 percent.

PLUS loans, which either parents or graduate students can borrow, will rise to a fixed 7.21 percent from 6.41 percent.

Rates are fixed for the life of the loan, but the cost of debt in future years could still go higher. In fact, according to projections by the Congressional Budget Office, student loan rates could reach 7.05 percent by 2018.

"People will think fondly of when the rate on a Stafford loan was only 6.8 percent," said Mark Kantrowitz, an expert on college financing and publisher of Edvisors, an online resource about financial aid.

What to do. Steeper interest rates mean students will face higher monthly bills once they're out of school.

Even so, Kantrowitz says, federal loans are still the best option for the growing number of students who need to borrow to pay for college.

For one, interest rates on federal student loans are capped at 8.25 percent to 10.5 percent, depending on the type of loan. Payment options include income-based repayment plans, which cap your monthly bill to an affordable percentage of your income, and the ability to defer payments if, say, you lose your job.

Federal student loans may be cheaper than private loan options.

At Sallie Mae, for example, fixed rates for private student loans range from 5.74 percent to 11.85 percent. To get the lower rate you need an excellent credit rating.

In contrast, most federal student loans do not require a credit check.

What to know about rising student loan interest rates 06/01/14 [Last modified: Sunday, June 1, 2014 8:28pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Tribune News Service.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. A sports rout on Wall Street

    Retail

    NEW YORK — Sporting goods retailers can't shake their losing streak.

  2. Grocery chain Aldi hosting hiring event in Brandon Aug. 24

    Retail

    BRANDON — German grocery chain Aldi is holding a hiring event for its Brandon store Aug. 24. It is looking to fill store associate, shift manager and manager trainee positions.

  3. Lightning owner Jeff Vinik backs film company pursuing global blockbusters

    Corporate

    TAMPA — Jeff Vinik's latest investment might be coming to a theater near you.

    Jeff Vinik, Tampa Bay Lightning owner, invested in a new movie company looking to appeal to a global audience. | [Times file photo]
  4. Trigaux: Look to new Inc. 5000 rankings for Tampa Bay's future heavyweights

    Business

    There's a whole lotta fast-growing private companies here in Tampa Bay. Odds are good you have not heard of most of them.

    Yet.

    Kyle Taylor, CEO and founder of The Penny Hoarder, fills a glass for his employees this past Wednesday as the young St. Petersburg personal advice business celebrates its landing at No. 25 on the 2017 Inc. 5000 list of the fastest growing private companies in the country. Taylor, still in his 20s, wins kudos from executive editor Alexis Grant for keeping the firm's culture innovative. The business ranked No. 32 last year. [DIRK SHADD   |   Times]
  5. Ford's Garage opens new Westchase spot

    Business

    Ford's Garage opened its sixth Florida location in Westchase this week.

    hillsevbiz081817: Ford's Garage opened its sixth Florida location in Westchase this week. Photo courtesy of Ford's Garage