INDIANAPOLIS — Federal student loan rates are going up 1.03% for the 2024-25 school year. That is money disbursed between July 1, 2024, and June 30, 2025.
For undergrads, that is a 16-year high. For parents and grad students, it is a record-high.
Undergraduate direct loans will have a 6.53% interest rate. For graduate and professional direct loans, the rate is 8.08%. Direct PLUS loans for parents and graduate students, 9.08%.
Kate Wood, with NerdWallet, said rates are up because they are tied to the 10-year Treasury loan, which is basically the rate that the government is paying on its debt.
"Because that (10-year treasury loan) is high right now, interest rates on federal student loans are going to be higher," Wood said, "it all ties back to the Federal Reserve."
Before you agree to any loan, you can estimate your post-college payments with NerdWallet's calculator.
For example, $10,000 at next year's rate for the standard 10-year term would mean around $113 a month.
Just remember, how much you are borrowing, and the interest rates can change every year you are in school.
Wood said federal student loan rates are the same for all borrowers and a fixed-rate.
"They are going to stay as is, unless later on you decide to, after graduation, consolidate your federal loans. At that time, you won't refinance necessarily to a lower interest rate overall, but you will refinance to a rate that is the average of the rates that you have," Wood explained.
If you are deciding between getting federal and/or private loans, NerdWallet suggests using your federal options first.
One of the reasons? Their protections.
"Say you were to wind up in a situation where you had a medical emergency, or you had lost a job. You were having troubles struggling to pay those loans. With federal student loans, you've got options built right in, that can help you with repayment," Wood said.
If you need to shop around for private loans, ask questions about the repayment timeline and hardship including illness or death.
Private loans might also require a cosigner.
"For parents who are considering borrowing for their child's education: As much as you love your children and you want the best for them, you also want to be sure you're taking care of," Wood said.
That means funding retirement, maintaining an emergency fund and covering basic need.