Education Department Lowers Rates for Student Loans
Borrowers will see lower rates in 2019, for the first time in three years.
A small bit of relief for students and families who are about to take out student loans to pay for college or graduate school.
The Department of Education has lowered interest rates on student loans for the first time in three years.
From July 1, 2019 to June 30, 2020, the rates on Federal student loans will be:
- Undergraduate Subsidized and Unsubsidized Direct Loans: 4.53% (- 0.52%)
- Graduate Direct Loans: 6.08% (- 0.58%)
- Graduate and Parent PLUS Loans: 7.08% (- 0.52%)
These new rates apply only to new borrowers and last for the life of the loan. Credible, an online resource with information and comparisons on different types of loans, estimates that thanks to the lowered rates, the average borrower will save anywhere from $199 to $805, depending on the type of loan they have .
Additionally, it is important to note that these rates apply only to federal loans, not to loans by private banks (each bank sets its own interest rate). Often banks will have lower rates, but these loans do not offer all the features of federal student loans, including income-driven repayment plans and loan forgiveness.
Experts say that while the lower rates are a temporary benefit to new lenders, they should not count on these rates for the entirety of their academic careers.
"The lower rate is just for the loans taken out this year. Who knows what will happen to rates a year from now," Mark Kantrowitz, publisher of Savingforcollege.com, explained to the Pittsburgh Post-Gazette .
For those who are currently paying off student loan debt, federal loans can be forgiven after 20 years or 25 years, if the borrower is still making payments, and borrowers who work for a public or nonprofit employer could qualify for loan forgiveness after only 10 years of repayment.
Some financial experts have called the current student loan situation a "crisis," citing a total bill of $1.6 billion nationwide. Several presidential candidates, including Sen. Bernie Sanders (I-VT) and Sen. Elizabeth Warren (D-MA) have introduced plans to provide debt forgiveness for student borrowers.