{"id":1868,"date":"2022-05-14T22:51:38","date_gmt":"2022-05-15T03:51:38","guid":{"rendered":"http:\/\/fitbuxarticles.fitbux.com\/?p=1868"},"modified":"2025-02-06T09:04:43","modified_gmt":"2025-02-06T15:04:43","slug":"student-loan-interest-rates","status":"publish","type":"post","link":"https:\/\/www.fitbux.com\/articles\/student-loan-interest-rates\/","title":{"rendered":"Federal Student Loan Interest Rates"},"content":{"rendered":"

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.<\/p>\n

This article provides a brief background on the student loan \u201cinterest rate calendar\u201d and a potential strategy for students to consider in order to mitigate part of the impact of student loan interest rate increases.<\/p>\n

Student Loan Interest Rate Calendar\u00a0<\/strong><\/h2>\n

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.<\/p>\n

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).\u00a0 The student loan interest rate is set by adding a margin to the 10 year treasury.\u00a0 A margin is a fancy word for adding interest to the another interest rate.<\/p>\n

Congress adds a margin of 2.05% to undergrad loans, 3.6% to graduate loans, and 4.6% to PLUS loans.\u00a0<\/p>\n

Following is an example of how the student loan interest rate calendar works.\u00a0 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%.\u00a0 After July 1, 2023 the interest rates will rise to approximately 7.54%.<\/p>\n

A Strategy To Think About When Student Loan Interest Rates Rise<\/strong><\/h2>\n

Current Federal student loan interest rates are as follows:<\/p>\n

Undergrad interest rates: 4.99%Graduate interest rates: 6.54%PLUS interest rates: 7.54%<\/p>\n

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:<\/p>\n

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\u2019t currently need in the bank for now.<\/p>\n

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.<\/p>\n

Advantage<\/strong><\/h2>\n

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.<\/p>\n

Disadvantage<\/strong><\/h2>\n

Loans aren\u2019t cheap. If you are taking the loan today, two things will happen:<\/p>\n