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  • Writer's pictureRealFacts Editorial Team

Federal Student Loan Interest Rates About to Reach Highest in Decades


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Undergraduates planning on using federal student loans to fund their college education may be in for a rude awakening as interest rates for student loans are about to reach their highest levels in more than a decade. Each year, the interest rate for federal student loans is determined by the May-10 Treasury auction, which happened last Wednesday.


An important thing to keep in mind is that federal student loans cannot be refinanced, so the interest rate is constant for the course of your loan. Jillian Berman of MarketWatch wrote the following on what rates will be for the 2024-2025 school year, “For the 2024-2025 school year, loans for undergraduates will have a rate of 6.5%, according to Mark Kantrowitz, an expert on student financial aid. Rates for graduate Stafford loans, which have an annual limit, will be 8%. PLUS loans, which are available to graduate students and parents, will have a rate of 9%. Parents and graduate students can borrow up to the cost of attendance through the PLUS program.” This is going to be a serious problem for many in the economy, as you can see from the below graph from the Education Data Initiative.


Graph of increasing student loan debt

As the graph shows we are at all-time highs in total student debt as a country, and many students are struggling with the burden. Jillian Berman continues, “Interest rates have been a key source of stress for borrowers. Many borrowers have watched their balances balloon even as they’ve made payments on the loans for years.” The following are two quotes from different students who wrote about their struggles: 


  • “Is there any hope to lower interest rates to a more manageable rate? It’s hard to see any progress when all my payments cover the interest every month?”

  • “I have no problem paying back my loans I obtained for my education, my concern is the interest that I am paying…I have been making payments every month but the balance NEVER goes down. I have since realized that is because I am only paying interest.” 


As can be seen, even at current rates many are struggling with interest payments and debt, how do we expect them to handle it at rates that are even higher? Student debt is going to continue to be a burden for many in the economy.


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