For the first time in three years, rising college costs will reflect not only the increase in tuition and fees but also higher interest rates on student loans. Beginning this academic year, rates on federal loans for undergraduates increase to 4.45% from 3.76% and for graduate students to 6% from 5.31%. In addition, rates on Grad Plus and Parent Plus loans jump to 7%, from 6.31%.
The new federal loan rates for the 2017-2018 academic year cover borrowings from July 1, 2017 to June 30, 2018; they are fixed and will not change during the term of the loan. The rates are based on a set spread to the 10-year Treasury auction results in May, ranging from 2.05% for undergraduate loans to 4.6% for Plus loans.
While rates are rising, fees and loan limits on federal student loans are not. The fee for undergraduate loans is 1.068% for subsidized loans (loans that don’t accrue interest while the student is in school and for six months after graduation) and 1.069% for unsubsidized loans. For Parent Plus and Grad Plus loans the fee is 4.27%.
Also unchanged for the coming school year are loan limits. For undergraduate students the limits are $5,500 for the first year, $6,500 for the second and $7,500 for the third and fourth years. The cumulative limit remains unchanged, at $31,000.
For graduate students the limit is $20,500 per year ($40,500 for medical school) with a cumulative limit, including undergraduate loans, of $138,500. The borrowing limit on Parent Plus and Grad Plus Loans remains the annual cost of the school minus any financial aid, and there is no cumulative limit.
Only Pell grants, given to students in need (whose expected family contribution is $5,328 or lower] saw an increase in loan limits, albeit a very small one, from $5,815 to $5,920.