June 27 (UPI) — Student loan debt will get heavier for many students as federal interest rates for new college loans will increase on July 1.
The new rate for undergraduate student Stafford loans will be 4.45 percent, compared to the previous rate of 3.86 percent after the Treasury Department’s auction of 10-year notes in May.
Graduate students will see an increase in their loan interest rates, going from 5.41 percent to 6 percent.
Parents taking out loans to help pay for their child’s college education will also see a rise. PLUS loans will jump from 6.41 percent to 7 percent.
The increases go into effect for new loans starting July 1.
Under the previous 3.86 interest rate, the amount of interest to be paid on the average student loan debt of $30,000 came out to $6,229 if the total debt is paid off within a 10-year period.
Under the new 4.45 percent interest rate, the total interest over 10 years would be $7,247.
“The financial impact of this increase is on the order of a few dollars a month on a 10-year repayment plan for every $10,000 borrowed,” Mark Kantrowitz, vice president of strategy for college and scholarship search site Cappex.com, told CNBC.
Despite the higher federal interest rates, Brianna McGurran of personal finance website NerdWallet said that they are still a better deal than borrowing from private companies.
“Since their interest rates are fixed, they won’t go up in the future, and they also come with crucial protections like income-driven repayment and forgiveness for public-sector workers,” she said.