Parents and students should prepare for higher borrowing costs for the coming academic year, as federal student loans rates will go up starting on Saturday.
As CNBC reports, rates were set in May during the Treasury Department’s last auction of 10-year notes.
The rates for the undergraduate Stafford loans will go from 3.76 percent this year to 4.45 percent. Rates for graduate school Stafford loans will go from 5.31 percent to 6 percent. And rates for PLUS loans, which go to graduate students or parents, will go to 7 percent from 6.31 percent.
The new rates apply to loans taken out between July 1, 2017 and June 30, 2018.
Federal student loan rates are fixed for the life of the loan. So an undergraduate borrowing $5,500 for a year at last year’s rates would pay $220 more in interest at this year’s rates assuming a 10-year repayment timeline, according to Money magazine.
Still, experts say, federal student loans are a relatively good deal. A decade ago, rates were above 6 percent, Money magazine said.