Education Dept. announces highest federal student loan interest rate in more than a decade

[BumRushDaShow]

Source: cnbc

Published Tue, May 14 2024 1:49 PM EDT Updated 10 Min Ago


The U.S. Department of Education announced on Tuesday the interest rates on federal student loans for the 2024-2025 academic year.

The interest rate on federal direct undergraduate loans will be 6.53%. That’s the highest rate in at least a decade, according to higher education expert Mark Kantrowitz. The undergraduate rate for the 2023-2024 year is 5.5%.

For graduate students, loans will come with a 8.08% interest rate, compared to the current 7.05%. Plus loans for graduate students and parents will have a 9.08% interest rate, an increase from 8.05% now. Both of those rates haven’t been as high in over 20 years, Kantrowitz said.

The rise in interest rates could complicate the Biden administration’s efforts to get the student loan crisis under control and relieve borrowers of the pain of interest accrual, experts say. Even as millions of people have benefited from recent debt relief measures, new students will be saddled with more expensive loans for decades to come.

Read more: https://www.cnbc.com/2024/05/14/education-dept-announces-2024-25-interest-rates-on-student-loans.html

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Link to Federal Student Aid (FSA) ANNOUNCEMENT - (DL-24-03) Interest Rates for Direct Loans First Disbursed Between July 1, 2024 and June 30, 2025

[Biophilic]

1. I don't get it. Biden tries to help stuidents who already have loans, but

then the administration turns around and offers really high interest rates for those just starting their collage education. This makes no sense to me. Who's running the Education Dept.? Why would they do this?

[Nittersing]

2. I have the same questions... nt

[ananda]

4. Ditto

This makes no sense whatsoever.

[Elessar Zappa]

5. I think it's more the banks' fault.

Someone correct me if I’m wrong.

[Jacson6]

7. No, The money for federal student loans come from the government.(Bonds & taxpayers)

Private Banks can make their own student loans that you pay back to the bank.

[Beowulf42]

8. Banks

Anyone who wants to know who is running the student loan racket, it's the banks. Years ago it was indentured servitude, today it's called a student loan. It's criminal that nothing has been done to at the very least set the rate at 2%. We all know that banks can borrow money at lesser rates than 2%.

[former9thward]

10. Not true.

The banks got out of the federal student loan program in 2010. The money comes from the federal government, and they set the rates.

[GB_RN]

11. It's Not Biden...

Rates are set by statute. From a relevant USA Today article:

Congress sets federal student loan interest rates annually. These rates are determined using the 10-year Treasury note auction yield and other factors, and they apply to new federal loans disbursed from July 1 of the current year to July 1 of the following year.

[elleng]

12. Thanks. Still confusing.

'Congress sets federal student loan interest rates annually. These rates are determined using the 10-year Treasury note auction yield and other factors.'

[GB_RN]

14. Don't Know What "Other Factors" Are...

Here’s the Treasury’s explanation of bond prices vs interest.

One thing to remember: As bond prices rise, yields (interest paid) decrease. Prices decrease, yields increase. They flow inversely.

I hated dealing with bonds in my Finance classes. 👎

[elleng]

15. Right. Thanks.

I never studied finance! Coincidentally, 'bought' my previously leased car yesterday. Guy in dealership straightforward, and I spoke with one banker, who had one question for me. (Ended up dealership gave me a small 'gift,' in arriving at my price.)

[GB_RN]

16. Ugh...

Car buying. What a nightmare. I’d rather have bamboo shoots shoved under my fingernails…

[elleng]

18. Was much more clear, easier, simple (and FRIENDLY!) than I'd thought it would be.

[Traurigkeit]

3. Dept. of Ed. do not control the banks.

[former9thward]

9. The banks got out of the federal student loan business in 2010.

The money comes from the federal government, and they set the rates.

[Jacson6]

6. I strongly support a maximum 1% interest rate on federal student loans

We don't have a government so that it can make a profit from College students. Elizabeth Warren suggested a low interest rate years ago, but Congress did nothing.
The 1% could be paid to the loan servicers to reimburse them for their expenses and profit.

IMHO.

[brooklynite]

13. The answer to "why can't President Biden stop this" is that he can't ignore legislation

The borrowing rate for student loans is set by adding a fixed amount of 2.05 percentage points to the yield on the 10-year Treasury bond, which is determined annually at a May auction. At the auction on Wednesday, 10-year Treasury bonds were sold at a 4.48% yield.

https://abcnews.go.com/Business/student-loan-rates-set-reach-16-year-high/story

[elleng]

17. The auction may be the major confusion,

pretty difficult to understand WHERE, HOW, and among whom such auctions work.

[Lonestarblue]

19. What a sad situation for US students when other wealthy nations send their kids to college for free.