in our free newsletter.

Thousands benefit from our email every week.

  • Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

Decade-high rates

Federal student loan rates get recalculated every year, based on the 10-year Treasury bond auction in May, and remain fixed for loans taken out during the 12-month period.

So, if you took out a loan last year, it won’t be affected by the new rate since it’s locked in to an older rate — but if you’re taking out a new loan between July 1 of this year and June 30 of next year, be prepared for the higher cost of borrowing.

For undergraduate student loans this coming academic year, the interest rate will jump from 4.99% to 5.5% — the highest it has been since 2013, when the rate spiked to 6.8% before Congress passed a bipartisan bill to cut it in half.

Graduate students will contend with a hefty rate of 7.05%, up from the current 6.54%, and the federal PLUS loan rate for graduate students or parents paying for their children’s education will climb from 7.54% to 8.05%.

These rates are the highest they’ve been since 2006, when Congress began requiring direct federal student loans to have fixed rates.

How to get a free $40 to invest in your future

An app called Acorns automatically rounds up purchases made on your credit or debit card to the nearest dollar and places the excess "change" into a smart investment portfolio. For a limited time, Acorns is offering a $40 welcome bonus, immediately from your first investment.

Get $40 - Limited time offer!

Comparison before the freeze

The high amounts borrowers will be paying on new loans seems more drastic when comparing these rates to what they were in the 2020-2021 academic year.

For example, say you’re taking out a $5,500 loan, assuming a 10-year term, you could be paying almost $60 a month on that debt with a 5.5% interest rate.

In 2020-2021, when the interest rate dropped to a record low of 2.75%, you’d pay just $52 a month — and save about $865 in interest over the lifetime of the loan.

If you’re the parent of a student, you could take out a PLUS loan with a 8.05% interest rate. Parents can basically borrow for the child's cost of attendance minus any other financial aid, so if your child's cost of attendance for the year is $6,000, and they receive $4,000 in other financial aid, you can borrow up to $2,000 with a PLUS loan.

Assuming a 10-year term, a parent could pay about $24 a month on that debt with the new interest rate, compared to the $22 with a 5.30% interest rate back in 2020-2021. This would also mean paying about $337 more in interest over the course of the loan.


This Company Will Help Nearly Anyone Get Rid of Credit Card Debt

Do you feel like paying off your credit card is a constant grind, with no end in sight? You’re not alone. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff.

Fiona is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

About the Author

Serah Louis

Serah Louis


Serah Louis is a reporter with She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.

What to Read Next


The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.