Students heading back to college this fall will now save thousands in interest charges on their student loans, after they graduate. On August 9, 2013, President Obama signed legislation that lowers the current federal loan interest rates.
For the 2013-1014 school year, the interest rate on new loans taken out by undergraduates will be 3.86 percent, 5.41 percent for graduate students and the rate for PLUS loans, which are taken out by parents, will be 6.41 percent.
These new rates will lock in for the lifetime of the loan and are significantly better than the rates of 6.8 percent for undergraduates and graduates and 7.9 percent for PLUS loans that would have applied, without this new legislation.
While the student loan interest rates for the coming school year have been reduced, rates could potentially end up higher in the coming years for future students. While rates can increase, Congress has imposed caps on how high these rates can go in future years.
The maximum rates are:
- 8.25 percent for undergraduates
- 9.5 percent for graduate students, and
- 10.5 percent for PLUS loans