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Rates on U.S. Student Loans to Fall

May 18, 2015 Jasiel Moreno

By Annamaria Andriotis

May 13, 2015

 

Interest rates will be lower on federal student loans given out for the upcoming academic year, cutting costs for millions of college students and their families.

The rate on federal Stafford loans for undergraduates will be 4.29% for the 2015-16 year, down from 4.66% on loans given out during the 2014-15 school year.

On graduate Stafford loans, the interest rate will be 5.84%, down from 6.21%.

On Plus loans, taken out by many parents of undergraduates as well as graduate students, the interest rate will be 6.84%, down from 7.21%.

The new interest rates go into effect for loans disbursed beginning on July 1 for the upcoming school year.

Most federal student-loan rates are pegged to the final auction of 10-year Treasury notes each May. The high yield on the 10-year note was 2.237% on Wednesday. That was down from 2.612% at the final auction in May last year.

Congress voted in 2013 to change the way interest rates on federal loans are determined, by pegging them to the last 10-year Treasury auction each May. Prior to that, federal loans had fixed rates that were set by Congress. The change came after the undergraduate subsidized Stafford loan, on which interest is paid by the federal government while the student is in school, was set to spike from 3.4% to 6.8% in 2012. Congress extended the 3.4% for another academic year and then changed how loan rates are determined.

Another federal subsidized loan, the Perkins loan, was not impacted by the change and remains fixed at 5% indefinitely.

 

Source: The Wall Street Journal