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Interest rates on federal student loans increase for the next school year. Here are your options. (iStock)
Interest rates on federal student loans rose more than two percentage points in early July, from 3.71% last school year at 3.73%. Federal loan rates are fixed and each year the loans have a new fixed rate, which is reset on July 1. Parents and students have several options available to them in determining how to pay for the upcoming school year.
The new rate is based on the yield of the 10-year treasury bill auction in May, a formula established by the US Department of Education. here are the the latest federal student loan rates on July 1, 2021:
- Subsidized direct and unsubsidized direct loans for the first cycle: 3.73%
- Non-subsidized direct loans for graduates or professionals: 5.28%
- Direct PLUS loans for parents and graduates or professionals: 6.28%
This represents an increase of 2.05 percentage points from the 2021 to 2022 school year, according to the Department of Education. 3.6 additional points were added for graduate student loans and 4.6 points for PLUS loans.
There are several options available to student loan borrowers as interest rates rise, including scholarships and grants, federal student loans, and private student loans. To compare private student loan options and see which option is best for you, visit Credible to find your personal interest rate for private student loans.
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1. Pay for your studies by taking out a private student loan
Although student loan interest rates are rising, they remain historically low. As recently as for the 2018 to 2019 school year, federal undergraduate student loan rates hit 5.05%. And while private student loan rates are generally higher than federal rates, they are also near historic lows.
“When considering private student loans, know your options to ensure you get the best outcome for your unique situation,†said Robert Humann, director of income at Credible.
If you are considering taking out a private student loan, be sure to compare several options. Visit Credible to find your student loan interest rate from multiple lenders at once.
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2. Look for scholarships and financial aid
Before applying for any type of student loan, borrowers should review their eligibility for scholarships and other student aid – like grants – through the Free Application for Federal Student Aid (FAFSA).
“This is the season when students and parents are making tough decisions about how to pay for college as the fall semester approaches,†Humann said. “Take advantage of grants, scholarships, financial aid and consider work-study opportunities before turning to federal and private loans. “
If you are looking for ways to make up the difference in tuition fees and you are not eligible for grants, consider a private student loan. Head over to Credible to get prequalified without affecting your credit score.
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3. Take out a federal student loan
The average cost of tuition fees in the state for national universities has increased by 72% from 2008 to 2021. For the 2020 to 2021 school year, tuition has increased to $ 41,411 at private colleges, $ 11,171 for state residents at public colleges, and $ 26,809 for international students, according to the data. from the annual US News survey.
Federal student loans are also generally a better option than private student loans. Despite the rising rates, they generally have lower interest rates than private loans. And unlike private student loans, they qualify for the current break in federal student loan payments during the COVID-19 emergency through September and could be included in any student loan cancellation program.
But federal loan programs reach a maximum of $ 5,500 for dependent undergraduates. If you don’t qualify for federal student loans or need to borrow more than federal limits, consider taking out a private student loan. Visit Credible to compare several options and speak to a student loan expert to get all of your questions answered.
Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.
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