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Financial Planning > College Planning > Student Loan Debt

Education Department Announces New Lower Student Loan Rates

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It’s official: Federal student loan rates will decline for the first time in three years for the 2019-2020 academic year, according to Thursday’s announcement from the federal Department of Education.

The rates are as follows:

  • 4.53% for direct subsidized and unsubsidized loans for undergraduates
  • 6.08% for graduate and professional students loans (all these loans are unsubsidized)
  • 7.08% for parent PLUS and Graduate PLUS loans (also unsubsidized)

Interest on subsidized loans does not accrue while a student is attending school on at least a half-time basis; it accrues for all unsubsidized loans.

These are same rates (rounded up to the one-hundredth) that released a week ago, as reported by ThinkAdvisor. They are based on different spreads to the high yield reached at the May 8 10-year Treasury note auction, and they are effective for loans disbursed on or after July 1, 2019 and before July 1, 2010. They are fixed for the term of the loan.

While student loan rates are reset annually, loan limits are not. They haven’t changed in more than a decade even though the cost of college has risen substantially.

The loan limits are as follows:

  • For undergraduate loans: $5,500 the first year, $6,500 second year and $7,500 for the next two years and $31,000 in total, including no more than $23,000 of this amount in subsidized loans. (There are annual limits on subsidized loans).
  • For graduate student loans: $20,500 annually and $138,500 in total (including undergraduate federal loans) with no more than $65,500 in subsidized loans.
  • The maximum borrowing amount for PLUS loans is the cost of attendance at a school minus financial aid.

During the past 10 years, the average published cost for tuition, fees and room and board increased 30% to $21,370 for four-year public colleges for in-state residents and 25% to $48,510 for four-year nonprofit private colleges for the 2018-2019 academic year. As a result of these price increases, more families and graduate students are taking out PLUS loans to help fill the gap between school costs and borrowing limits for other cheaper loans, according to Credible, an online marketplace for student loans.

Rates on private loans are often lower than the rates on federal graduate student loans and PLUS loans for parents and graduate students, but borrowers of private loans are not privy to repayment options available under the federal loan program including income-based repayment and student loan forgiveness programs.


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