What Do Higher Interest Rates Mean For Your Student Loans?

May 15, 2018
Student loans

Higher Interest Rates

Once a year, the federal government sets the annual interest rate on federal student loans. This rate effectively determines how expensive it is for students to borrow money from the government for their education. Although this interest rate has been increasing in recent years, Congress has set a ceiling of 8.25% on these loans.

While the Department of Education hasn’t formally set interest rates on student loans yet, this year’s rates are expected to increase. Last year, undergraduate Stafford loan interest rates were at 4.45%. Estimates for this year’s rates are 5.045%. For a student with $10,000 in student debt, monthly payments will increase from $103.40 to $106.29. For graduate Stafford loans and Plus loans, interest rates are expected to increase even more.

While these higher interest rates may seem insubstantial at first, many predict that they will continue to rise in coming years. When students pay more to borrow money for college, it has major effects on the individual and the economy as a whole.

About the Author

Sabrina Kite

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