Federal Reserve Chairman Jerome Powell attends a press conference in Washington, DC, USA … [+]
The latest rates of interest on federal student loans for the 2024-2025 school yr will increase significantly in the autumn. All federal student loans offer a hard and fast rate of interest, and the brand new rate of interest applies to loans disbursed between July 1 and June 30.
Federal student loan rates of interest are set based on a formula that uses the high yield from the last 10-year Treasury bond auction in May. The auction took place on May eighth, so we will now calculate the rate of interest on the scholar loan.
Student Loan Interest Rates 2024-2025
The latest student loan rates of interest for the 2024-2025 academic yr are as follows:
Direct Student Loans: 6.53%
Direct Graduate Loans: 8.08%
Grad PLUS Loan: 9.08%
Parent PLUS loan: 9.08%
Interest rates there have risen significantly in recent times, largely on account of inflationary pressures and the Federal Reserve raising rates of interest to counteract this. The rates for 2024 – 2025 are throughout 1% higher than within the previous yr.
Comparing this fall’s rates to pre-pandemic rates, they’re nearly 20% higher.
How federal student loan rates of interest are calculated
Many borrowers are concerned about rising student loan rates of interest and wonder why loan rates of interest need to be so high?
Student loan rates of interest are calculated based on laws passed by Congress. The law is as follows:
Direct Student Loans: Yield on 10-year government bonds plus 2.05%
Direct Graduate Loans: Yield on 10-year government bonds plus 3.60%
Grad PLUS Loan: Yield on 10-year government bonds plus 4.60%
Parent PLUS loan: Yield on 10-year government bonds plus 4.60%
If rates of interest proceed to rise, it is vital to notice that rate of interest caps apply to those loans. Currently, Student Direct Loans are capped at 8.25%, Graduate Direct Loans at 9.50%, and PLUS Loans at 10.50%.
Final thoughts
Student loan rates of interest will proceed to rise so long as the Federal Reserve raises rates of interest to combat inflation. However, because the tariffs for the years 2025 to 2026 is not going to be set until next May, there continues to be time for the tariffs to be reduced.
