May 12, 2020

Rates May Drop To Lowest Ever

Rates May Drop To Lowest Ever

Interest rates for federal student loans may drop to their lowest level ever.

Here’s what you need to know – and what it means for you.

Student Loans

College and graduate school may become much cheaper starting this fall. That’s good news for students and parents who borrow student loans to fund their education. While tuition may not decline, interest rates on new federal student loans will be significantly lower than last year, which can save you money. Each May, Congress (not the U.S. Department of Education) sets federal student loan interest rates for the upcoming school year based on an auction of 10-Year Treasury notes. Treasury yields have plummeted over the past year due to several interest rate cuts by the Federal Reserve and COVID-19, among other factors. The new interest rates are effective July 1, 2020 through June 30, 2021. The new interest rates for federal student loans for the 2020-2021 school year will be announced today around 1:30 pm Eastern Time. (You can check back then for the updated rates). Here are the estimated new rates for federal student loans based on the 10-Year Treasury yield of approximately 0.70%:

Undergraduate Student Loans (Subsidized and Unsubsidized)

  • Current Rate: 4.53%
  • Estimated New Rate: 2.75%

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