Federal Student Loan Interest Rates

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Author: Joseph Reinke, CFA

There is a lot of chatter among grad school students about the high-interest rate the Federal government charges on student loans. Unfortunately, student loan interest rates will be even higher come July 2022.

This article provides a brief background on the student loan “interest rate calendar” and a potential strategy for students to consider in order to mitigate part of the impact of student loan interest rate increases.

Student Loan Interest Rate Calendar 

Student loans are on an annual calendar that ends each June: the Federal government sets new student loan interest rates each June and those are the rates are from July 1st till the end of June the following year.

Federal student loan interest rates are determined each year by the rates of 10 year treasury notes (Treasury notes are loans sold to investors by the US Government).  The student loan interest rate is set by adding a margin to the 10 year treasury.  A margin is a fancy word for adding interest to the another interest rate.

Congress adds a margin of 2.05% to undergrad loans, 3.6% to graduate loans, and 4.6% to PLUS loans. 

Following is an example of how the student loan interest rate calendar works.  If for example, you are a graduate student, your student loan interest rate on any “Non PLUS” Federal student loan disbursed before June 30, 2023 would be 6.54%.  After July 1, 2023 the interest rates will rise to approximately 7.54%.

A Strategy To Think About When Student Loan Interest Rates Rise

Current Federal student loan interest rates are as follows:

Undergrad interest rates: 4.99%
Graduate interest rates: 6.54%
PLUS interest rates: 7.54%

If you know you will need to borrow more money after June 2023 and have not yet max out how much you can borrow, then you may want to contemplate the following strategy:

If you are currently not taking out the maximum in student loans this semester/quarter, you may want to max this out anyway and put the extra money you don’t currently need in the bank for now.

That way, you have “cheaper money” available for future expenses and can put this money “to work” in an interest bearing account until you need it.


The primary benefit of this strategy is having a lower interest rate on your loans, which will save you money over the long run when you are in repayment.


Loans aren’t cheap. If you are taking the loan today, two things will happen:

  • You will start deferring interest immediately. In other words, your loans, whether or not you start using them immediately, will start accruing interest right away.
  • In addition, you will have to pay an origination fee, which we call the “the fee you’re charged for the privilege to borrow.”

Fees on Federal student loans range from 1.057% to 4.228%.

In short, there is no free money…

Next Steps

So what exactly should you do? There is no cookie-cutter answer because one needs to take into account 1) the unknown timing of potential future rate increases and 2) how much additional loans one will need to take.

Therefore, if you are contemplating implementing this strategy, I highly recommend speaking with your FitBUX Coach so you can customize your solution and see if it makes sense for you to implement.

By Joseph Reinke, CFA, CEO of FitBUX

Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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