The Marriner S. Eccles Federal Reserve Board Building in Washington D.C. The Fed increased federal student loan interest rates across the board.
Federal student loan interest rates will rise across the board starting on Saturday, July 1, 2017 and lasting until June 30, 2018.
The new rates were defined by the U.S. Treasury Department's May 10 auction of 10-year notes and published on the Department of Education’s Federal Student Aid website after the Federal Reserve officially raised interest rates.
Starting this Saturday, July 1, undergraduates who take out direct subsidized loans, or direct unsubsidized loans, will have to pay a 4.45 percent interest rate. This is an increase from the 3.76 percent interest rates of last year.
The rate hikes do not just apply to undergraduates, but graduate students as well.
Graduate or professional students will now have to pay 6 percent interest rates on direct unsubsidized stafford loans. Additionally, graduate students or parents will have to pay 7 percent interest rates when taking out direct PLUS loans, respectively.
Direct unsubsidized loans for graduates, which begin accruing interest as soon as the borrower takes out the loan, will see interest rates rise from 5.31 percent last year. Direct PLUS loans for both graduates and parents will see interest rates rise from 6.31 percent last year.
These increases do not apply to private student loans specifically; however, it can be assumed that these rates will follow suit with the market and rise.
According to the Student Loan Report, the national student loan debt currently sits at $1.41 trillion. There are 44,179,100 student loan borrowers in the U.S., or roughly 70 percent of college students. While rising interest rates is technically good news for the economy, it still spells bad news for the finances of student graduates.
Higher interest rates typically means more debt to handle later on, as well as larger monthly payments. Right now, the national student loan default rate currently is at 10.7 percent, while the delinquency rate is at 5.41 percent. The average student loan borrower holds about $27,857 in student loan debt.
Given the current market trend, one could surmise that these numbers would get worse in the short term. However, there is potential for improvement in the long run, assuming there are more jobs opening up and more money flowing through the economy.
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