The Department of Education has announced that interest rates on federal student loans will see a small hike in the upcoming school year, the New York Times reports. Interest rates on undergraduate student loans will increase from 4.45 percent to 5.05 percent for the 2018-2019 academic year, while graduate student loan rates will increase from six percent to 6.6 percent and the rate for PLUS loans will rise from seven percent to 7.6 percent—all effective July 1. The rates apply only to federal loans taken out after June 30 and do not not affect loans already received. The federal government recalibrates these interest rates annually, applying a formula set by Congress.
Mark Kantrowitz, a financial aid expert, told the Times that, under a standard 10-year repayment term, borrowers would see their payments increase just “a few dollars a month.” Still, Diane Cheng, associate research director at the nonprofit Institute for College Access & Success, encourages borrowers to be conservative about the amount they take out in loans. She told the Times that “federal loans should be [borrowers’] first choice,” because they come with guaranteed consumer protections and rates are fixed for the life of the loan, unlike private loans.