Federal Student Loan Interest Rates for the 2024-25 School Year: What You Need to Know
Federal student loan interest rates for the 2024-25 school year are set to rise slightly more than 1% starting on July 1, 2024. These rates will apply to all federal student loans disbursed between July 1, 2024, and June 30, 2025. The rates are fixed for the life of the loan.
The new rates are based on a formula that uses the high yield from the last 10-year Treasury Note auction in May. The auction that took place on May 8, 2024, determined the new rates for all types of Direct loans.
Students planning to apply for federal Direct student loans, whether as undergraduates, graduate students, or parents, will be affected by the new rates for loans issued on or after July 1, 2024. However, existing federal Direct loans will not be impacted, as they have a fixed rate for the life of the loan.
The rise in student loan rates is attributed to the increase in Treasury yields, which have been on the rise since 2022. The Federal Reserve’s high-interest rates to combat inflation have also contributed to the increase in student loan rates.
It’s important to note that federal student loans for the 2024-25 academic year will only be dispersed starting on July 1, 2024, when the new interest rates apply. The law also places caps on student loan rates, with undergraduate Direct loans capped at 8.25%, graduate Direct loans at 9.50%, and PLUS loans at 10.50%.
While federal student loan rates are rising, private student loan rates are generally higher. Private student loan interest rates range from 4% to 18%, compared to federal Direct loan rates ranging from 6.53% to 8.08%. Federal loans also come with fixed rates only and do not require a credit check, except for PLUS loans.
As the Federal Reserve continues to raise rates, student loan rates are expected to keep rising annually. However, fixed-rate loans taken out this year will remain at the current rates for the life of the loan. Students and families have time to plan and budget accordingly, with the next rate increase not expected until July 2025.