Allen J. Schaben/Los Angeles Times/Getty Images
A view of the University of Southern California campus in Los Angeles on December 7, 2023.
Washington
CNN
—
Borrowing to pay for college is about to get more expensive: The interest rate on new federal student loans for undergraduates in the upcoming 2024-25 academic year will be the highest in 12 years.
The federal interest rate on student loans will be 6.53% for undergraduates, up from the current 5.5% year. The interest rate has not been this high on undergraduate loans since 2012-13 school year.
Graduate students will benefit from an interest rate of 8.08% during their next university studies. year, against 7.05%. And PLUS loans, which are available to parents and graduate students, will carry an interest rate of 9.08%, up from 8.05%.
Rates for graduate students and their parents haven’t been this high since July 2006, when the government began setting fixed rates for student loans. Before that, most federal student loans had variable rates.
Higher student loan interest rates will make it more expensive for borrowers to pay off their debts — and could pose a problem for President Joe Biden, who is working to win over as many young voters as possible ahead of the November election.
To be clear, the president does not set federal student loan interest rates himself. Rates are set annually and are based on the 10-year Treasury bond auctions held each May. The increase is not a complete surprise since the Federal Reserve has kept the nation’s benchmark interest rate at its highest level in 23 years while waiting for inflation to subside.
Biden has already canceled more federal student loan debt — nearly $160 billion — than under any other administration, but debt relief for college graduates doesn’t make education any less expensive for current and future students .
Yet Biden’s new student loan repayment plan, known as SAVE (Saving on a Valuable Education), could make it easier for current and future borrowers to repay their federal student debt, despite rising loan rates. interest.
Launched last year, the income-driven repayment plan can lower enrolled borrowers’ monthly bills and reduce the amount they repay over the life of their loans.
Additionally, unpaid interest will not accrue as long as the enrolled borrower makes a full monthly payment. This means that a borrower’s balance will not increase even if the monthly payment does not cover the monthly interest.
The SAVE program is worth $475 billion over 10 years, according to one estimate, and faces legal challenges from two groups of Republican-led states who argue Biden does not have the authority to create the repayment plan.
Since the fall, the Biden administration has also been working on a series of new proposals aimed at providing debt relief for certain groups of borrowers. The proposals are not as broad as the student loan forgiveness program that Biden initially planned and which was struck down by the Supreme Court last year.
But if implemented successfully, the new initiatives could forgive up to $20,000 for borrowers whose balances have increased due to unpaid interest on their loans, regardless of the amount. income.
These new proposals have yet to be finalized, but some could come into force as early as this fall.
News Source : amp.cnn.com
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