Student loan rates will rise by almost 60 basis points across the board for the upcoming academic year, says Mark Kantrowitz, a well-known expert on financial aid and student loans.
Subsidized and unsubsidized federal Stafford loans for undergraduates will carry a 5.045% rate, the highest rate in nine years, up 0.595 percentage point. Graduate student loans and Parent Plus loans will charge rates of 6.595% and 7.595% — both the highest levels since the 2012-2013 academic year.
The Department of Education has not officially released the new rates, but since they’re always based on the last 10-Treasury note auction in May and since there is only one such Treasury auction, on May 9, Kantrowitz was able to calculate the new rates.
“It usually takes the U.S. Department of Education a few weeks to issue the press release concerning the new rates,” Kantrowitz wrote to ThinkAdvisor. “Last year they issued it on May 30.”
ThinkAdvisor has contacted the Education Department for comment but did not hear back by press time.
The loan rates are set as a spread to the 10-year Treasury note auction results: 2.05% for undergraduates Stafford loans and 4.6% for Parent PLUS loans.
Fees for the loan will start at 1.066% in the upcoming academic year, but they could be reset on Oct. 1, according to Kantrowitz. Fees are deducted from disbursements on new loans or borrowers can have them added to the loan balance.
(Related: CFPB Shutters Student Protection Unit)
There are currently 44 million student loan borrowers in the U.S. owing $1.5 trillion in student loan debt. One-quarter of those borrowers are behind in their payments or in default. Until recently they could get help from the Consumer Financial Protection Bureau when encountering difficulties with lenders or loan servicers, but the CFPB recently downgraded its student loan unit. It’s been folded into the bureau’s consumer information unit, which consumer advocates fear will slow or end the agency’s pursuit of lenders or servicers who may be cheating student borrowers.