Interest Rates on Federal Student Loans Will Rise in July

The Education Department hasn’t officially announced the new student loan rates, but Mr. Kantrowitz calculated them using the government’s formula, which adds an extra fixed rate depending on the type of loan.

The rate on direct loans for graduate students will rise to 5.28 percent from 4.3 percent. The rate on PLUS loans, additional loans available to parents and graduate students, will rise to 6.28 percent from 5.3 percent.

The new rates don’t apply to private student loans.

Here are some questions and answers about student loans:

Can I take out loans for next year now to get lower rates?

No. Rates on new federal student loans are set for each academic year, starting on July 1, using a formula set by Congress. The loans are offered through colleges, based on information you report on the Free Application for Federal Student Aid, or FAFSA.

The increase doesn’t affect rates on student loans that have already been borrowed. Once loan rates are set, they are fixed for the life of the loan.

How much can I borrow?

There are limits on the amount of money students can borrow in federal loans, annually and in total. In general, first-year, dependent students can borrow up to $5,500 and sophomores up to $6,500. For the third and fourth years, the limit is $7,500. The total cap is $31,000 — higher than the combined annual limits, in case a student takes longer than four years to graduate. Limits are higher for independent and graduate students.

When does the current pause on student loan payments end?

In March 2020, as part of the government’s pandemic relief program, Congress allowed most federal student loan borrowers to temporarily stop making monthly payments and set the interest rate on the loans to zero during the suspension. The suspension was extended several times, most recently in early 2021, when the Biden administration extended it at least through Sept. 30. Some advocates for borrowers support another extension, but it’s uncertain if that will happen.