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Hello, and welcome back to the Send Your Kids to College blog! If it's your first time, we use this blog to help local Western New York families and students to understand the many moving parts of college financial planning. We hope these articles help to provide confidence and insight into the process, but we are also here to help! If you're ever curious about one of our blogs, or have a question regarding college planning, don't be afraid to fill out our contact form or give us a call! We're based right in your backyard in Williamsville NY, and are here to help any WNYer who needs help with college questions.
Today on the blog we wanted to provide a quick update on the status of Federal Student Loan Interest, as the new rates were just announced. You can hear more on the subject by tuning into this morning's episode of WBEN930's A New Morning with Brian and Suzy.
Let's take a look.
New Federal Student Loan Interest Rates
Last year, rates increased slightly after a historic low due to the pandemic. This year rates went up again. The interest rates on new federal student loans are set each July 1st, based on the high yield of the last 10-year Treasury Note auction in May. The new interest rates for 2023-24 federal student loans disbursed on or after July 1, 2023, will be:
5.498% for undergraduate Federal Direct Stafford Loans
7.048% for graduate Federal Direct Stafford Loans
8.048% for Federal Direct Grad PLUS Loans
8.048% for Federal Direct Parent PLUS Loans.
You can head over to this page or click the button below to download a PDF.
The half-point increase continues the trend that began at the start of the COVID pandemic when interest rates reached a historic low. Since March 2022, the Federal Reserve Board has increased interest rates by a total of 5 percentage points. This does not affect interest rates on private student loans or old fixed-rate federal student loans.
The chart below demonstrates how interest rates have increased over the last few years.
Year | Federal Direct Stafford Loan (Undergraduate) | Federal Direct Stafford Loan (Graduate) | Federal Direct PLUS Loan (Graduate and Parent) |
2023-2024 | 5.498% | 7.048% | 8.048% |
2022-2023 | 4.993% | 6.543% | 7.543% |
2021-2022 | 3.734% | 5.284% | 6.284% |
2020-2021 | 2.750% | 4.300% | 5.300% |
What Impact Does This Change Have?
When you break it all down, the increase in interest rates yields an increase in the monthly student loan payment of about $2.50 per $10,000 borrowed, based on a 10-year repayment program. For the sake of demonstration, let's break down those averages on how this percentage increase will impact the cost of college, based on the most common federal education loan, undergraduate Direct Stafford student loans.
Year | Federal Direct Stafford Loan (Undergraduate) Interest Rate | Monthly Payment per $10,000 on 10-year term | Change Vs. 2020-2021 |
2023-2024 | 5.498% | $108.52 | 13.7% |
2022-2023 | 4.993% | $106.03 | 11.1% |
2021-2022 | 3.734% | $99.99 | 4.8% |
2020-2021 | 2.750% | $95.41 | 0% |
It's important for families to be aware of these things when taking steps toward paying for college. Knowledge is power! The more you know about paying for college, the better odds you have of paying LESS for college! If you have any questions regarding the changes to this year's Federal Student Loan Interest Rates, or just a college planning question, please don't hesitate to reach out! We are here for WNY!