College Game Plan

Federal student loans are about to get more expensive. What you need to know

Key Points
  • The government sets annual interest rates on student loans once a year.
  • This year's uptick was greater than expected.
  • Here's what borrowers need to know. 
Student loans are getting more expensive

Federal student loans will soon be pricier. 

The government sets annual interest rates on student loans once a year. The percentage is based on the 10-year Treasury note, which has been on the rise, including recently hitting 3 percent.

Although the Department of Education hasn't formally announced the new rates, this year's bump is likely to be higher than expected, said Mark Kantrowitz, a student loan expert.

"How investors feel about the economy has an impact on what the rates are, and there's a lot of chaos going on," Kantrowitz said, pointing to talk of tariffs and President Donald Trump's announcement that the U.S. is pulling out of the Iran nuclear deal. 

"It just happens to be bad timing from the point of view of the interest rates on student loans." 

Here's what borrowers need to know:

What are the new rates? 

Kantrowitz was able to estimate the new rates based on the 10-year Treasury Note auction on May 9. 

By his calculations, the interest rate on new undergraduate Stafford loans will rise to 5.045 percent for the 2018-2019 academic year, up from 4.45 percent last year. This will increase monthly loan payments on a 10-year repayment term to $106.29 from $103.40 for every $10,000 in debt borrowed that academic year. 

(Keep in mind that undergrads who are dependent students have annual loan limits ranging from $5,500 to $7,500, lessening that repayment impact.)

For graduate students, Kantrowitz projects that Stafford loans will come with a 6.595 percent interest rate, compared with 6 percent now. This would push up monthly loan payments on a 10-year repayment term to $114.03 from $111.02 per $10,000 in debt borrowed for the 2018-19 academic year.

He expects Plus loans for graduate students and parents will have a 7.595 percent interest rate, an increase from 7 percent. As a result, monthly loan payments on a 10-year repayment term will rise to $119.20 from $116.11 for each $10,000 in debt borrowed that academic year.

Who is affected? 

All federal education loans issued after July 1, 2018, will be subject to the new rates.

Don't worry about loans you've taken out for previous academic years: Federal student loan rates are fixed, and the rates on those existing loans won't change. 

(Sorry, families: You can't try to evade the rate increase by borrowing ahead of that deadline. Loans for the 2018-19 academic year must be taken out after July 1.) 

Still, just half of students and parents know that students aren't guaranteed the same interest rate on the federal student loans they borrow each year, according to a recent report by online loan marketplace 

"People go back each year and the rate can change," said Stephen Dash, CEO at Credible. "People should be particularly aware of that given the rising interest rate environment."

The rate changes apply only to federal student loans. Private loans come with their own — often higher — interest rates.

How much will you owe? 

Borrowers can use Kantrowitz's calculator on his website PrivateStudentLoans.Guru, to plug in their loan details and learn what they'll wind up owing. also has a handy loan cruncher, that will provide you a clear breakdown of how much you'll pay back in principle and interest. 

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