Borrowing for College Just Got Slightly Cheaper - The Washington Post

Starting Monday, the government will charge families less to borrow money for college as newly lowered interest rates on federal student loans take effect, the Washington Post reported. The annual rate change is pegged to the Treasury Department’s auction of 10-year notes in early May. Based on the rate of the note, plus a fixed margin, the interest on student loans can rise or fall from one year to the next. And for the past two years, rates have climbed. This year, families will get a reprieve. For the 2019-2020 academic year, undergraduate students will pay 4.53 percent in interest on new Stafford loans, down from 5.05 percent. Graduate students will see the interest rate on new Direct loans decline from 6.6 percent to 6.08 percent. And parents who take on federal debt to help their children pursue a degree can expect to pay 7.08 percent instead of 7.60 percent. There is no telling whether interest rates will continue to decline or rise, but Congress set a ceiling to prevent federal student loans from becoming too costly. The interest on undergraduate loans can never go higher than 8.25 percent. Graduate loans are capped at 9.5 percent, while the limit on PLUS loans — for eligible parents as well as graduate and professional students — is 10.5 percent.

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