Everyone taking out a loan after Wednesday are getting a break: Interest rates on federal student loans taken out after Wednesday will be lower than loans taken out the previous year.
That's because in 2013, Congress changed how student loan interest rates are set, moving from setting a number each year to basing it on the 10-year U.S. Treasury note rate in the spring of each year, plus a set increment for each fee. The rate is then locked in for the life of the loan.
The rates are:
■4.29% for Stafford loans for undergraduates, both subsidized and unsubsidized. That's down from 4.66% for loans issued in 2014-15.
■5.84% for Stafford loans for graduate students, down from 6.21% for loans issued in 2014-15.
■6.84% for Parent and Graduate PLUS loans, down from 7.21% for loans issued in 2014-15.
"Lower interest rates are great news for students who need loans this coming school year," Lauren Asher, president of the Institute for College Access and Success, a nonprofit that advocates for better student loan policy, said in a news release about the drop. "However, the Congressional Budget Office projects much higher rates next year.
"Federal student loans will still be the safest way to borrow, with fixed rates (and) income-based repayment plans. ... But Congress should act to make student loans simpler and more affordable."
That's because in 2013, Congress changed how student loan interest rates are set, moving from setting a number each year to basing it on the 10-year U.S. Treasury note rate in the spring of each year, plus a set increment for each fee. The rate is then locked in for the life of the loan.
The rates are:
■4.29% for Stafford loans for undergraduates, both subsidized and unsubsidized. That's down from 4.66% for loans issued in 2014-15.
■5.84% for Stafford loans for graduate students, down from 6.21% for loans issued in 2014-15.
■6.84% for Parent and Graduate PLUS loans, down from 7.21% for loans issued in 2014-15.
"Lower interest rates are great news for students who need loans this coming school year," Lauren Asher, president of the Institute for College Access and Success, a nonprofit that advocates for better student loan policy, said in a news release about the drop. "However, the Congressional Budget Office projects much higher rates next year.
"Federal student loans will still be the safest way to borrow, with fixed rates (and) income-based repayment plans. ... But Congress should act to make student loans simpler and more affordable."