Interest Rates on New Federal Student Loans Will Decrease

Interest rates on new federal student loans will drop for the 2015-16 academic year, The Washington Post reported.

Rates are set to decrease by more than one-third of a percentage point following the U.S. Treasury Department's auction of 10-year notes on Wednesday. The government resets rates on student loans every year based on the spring rate of the note, plus a fixed margin.

The rate on new undergraduate Stafford loans will drop to 4.29 percent, down from 4.66 percent this year. A freshman taking out $5,500 for the 2015-16 academic year will save approximately $117.63 in interest on a 10-year repayment plan.

The cost of new direct loans for graduate students will fall to 5.84 percent from 6.21 percent. The rate on PLUS loans for parents and graduate students will be set at 6.84 percent, down from 7.21 percent.

The new interest rates take effect on July 1. The changes do not affect borrowers with older loans. 

"It's a temporary anomaly. I think interest rates are going to start going up a year from now. It's just that the Federal Reserve has been slow to increase rates," said Mark Kantrowitz, senior vice president and publisher at Edvisors Network, a collection of college-related websites. "It's a market rate and it will fluctuate."


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The Washington Post