Student Loans Will Cost More
Beware that federal student loans will be more expensive this year because of rising interest rates.
Interest rates for federal student loans have inched up for the second time in as many years. The rate on undergraduate Stafford loans disbursed on July 1, 2018, or later is 5.05%, up from 4.45% last year. On Stafford loans for graduate and professional students, the rate is now 6.6%. And the rate on PLUS loans (which allow you to borrow up to the total cost of education, minus any financial aid) for graduates and parents is now 7.6%.
The higher rates won’t affect existing loans, but new borrowers will pay more interest over the life of the loan. For example, an undergraduate student who borrows $7,500 in new Stafford loans will pay about $2 more per month, or about $265 more over a standard 10-year repayment period.
The Federal Reserve is expected to continue to raise interest rates, so it’s more important than ever to reduce the amount you need to borrow. Make sure you’ve tapped all scholarships and grants you’re eligible for, along with savings, before taking out loans. Avoid private loans, which typically charge higher interest and don’t offer the same protections as federal debt. After graduation, sign up for automatic payments, which will cut your interest rate by 0.25 percentage point.