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Student Loan Rates Increase Today — Here’s Why And What To Do

This article is more than 2 years old.

Student loan rates will rise starting today.

Here’s what you need to know — and what to do about it.

Student Loans

Student loans are about to become more expensive for the upcoming school year. Here are the new rates for any federal student loans borrowed after July 1, 2021:

Undergraduate Student Loans (Subsidized and Unsubsidized)

  • Current Rate: 2.75%
  • New Rate: 3.73%


Graduate Student Loans (Unsubsidized)

  • Current Rate: 4.30%
  • New Rate: 5.28%


Parent PLUS Loans and Grad PLUS Loans (PLUS Loans)

  • Current Rate: 5.30%
  • New Rate: 6.28%

Why are student loans more expensive? Each May, Congress sets federal student loan interest rates for the upcoming school year based on an auction of 10-Year Treasury notes. The new interest rates are effective July 1, 2021 through June 30, 2022, and interest rates will be 0.98% (percentage points) higher. Unlike last year when student loan rates dropped, student loans will become more expensive for any student loan borrowers who borrow federal student loans for the upcoming school year.


Student Loans: Q&A

Which student loans does this affect?

The new interest rates apply to undergraduate student loans (both subsidized and unsubsidized), graduate student loans (unsubsidized), and Direct PLUS Loans (including Parent PLUS Loans and PLUS Loans for graduate or professional degrees like law, business, medicine, or dentistry, for example).


Does this affect my student loans?

If you have student loans, the new rates will not impact your existing federal student loans. If you borrow new student loans, then you will pay the higher interest rate on those new student loans.


Do these interest rates apply to private student loans?

No, these student loan interest rates only apply to federal student loans. Private loans have separate interest rates, which are set by the lender from which you borrow. Importantly, you should check if your private loans have a variable interest rate. If so, your student loan interest rate on your existing student loans could change (increase or decrease) as interest rates change.


Are these new student loan interest rates fixed or variable?

All federal student loans are fixed interest rate loans. This means that no matter what happens to interest rates, your interest rate will not change.


Can I borrow student loan now to get the lower interest rates?

Unfortunately, you cannot borrow new federal student loans for the upcoming school year before July 1, 2021 to get a lower interest rate. So, if you are borrowing student loans, you would need to borrow after July 1.


My student loans are currently paused. Does this affect me?

Federal student loan payments are currently paused through September 30, 2021 through temporary student loan forbearance. Interest rates on federal student loans are temporarily set to 0%. However, this student loan relief is for current student loans only. This interest rate increase applies to new student loans borrowed. If this student loan relief expires, your federal student loan payments and regular interest rate will resume starting October 1, 2021. It’s possible that President Joe Biden may extend this student loan relief beyond September 30, but absent an extension, you should expect to restart student loan repayment on October 1.


How can I get a lower interest rate on my student loans?

Student loan refinancing is the best way to get a lower interest rate for your student loans, whether they are federal or private. Currently, student loan refinancing rates are at an all-time low, which means that you could get a lower interest rate than your current rate. This can help you save money, pay off student loans faster, and get out of debt. You can refinance federal student loans, private student loans, or both. You can also refinance undergraduate, graduate, PLUS and Parent PLUS Loans. When you refinance student loans, you get a new, single student loan with a lower interest rate and one monthly payment. You can choose a fixed or variable interest rate as well as a student loan repayment term from 5 to 20 years.

To refinance your student loans, you’ll need a good to strong credit score (typically 650 or higher), be employed or have a job offer, have stable monthly income, and have monthly cash flow to pay your student loans and other living expenses. The good news is you can apply online, and there are multiple lenders from which to choose. If you are struggling to pay off student loans, need income-driven repayment plans, or want to pursue public service loan forgiveness (or similar program), then refinancing federal student loans is not recommended. If you don’t meet the requirements, you can apply with a qualified cosigner who can help you get approved and get a lower interest rate. Some lenders allow you to release the cosigner after you’re approved and meet certain requirements.

This student loan refinancing calculator shows you how much money you can save through student loan refinancing.


Student Loans: Related Reading

Biden has now cancelled $3 billion of student loans

Do you qualify for $500 million of student loan cancellation?

5 ways Biden can change student loan forgiveness

Do you qualify for $200,000 of student loan cancellation?

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