Federal student loan interest rates—known as Direct Loans on many a financial aid award—are set to rise from 3.76% to 4.45% for undergraduate students borrowing in the 2017-18 academic year.

This move upward was anticipated—student loan interest rates are tied to the 10-Year Treasury note (plus a small percentage tacked on), which seems kind of complicated to explain, so I’ll link you to it here—but we in the industry never like seeing students have to pay more for a college education. But, as Kurt Vonnegut so briefly and elegantly put it: “So it goes.”

That stated, here’s the full rundown on all the different federal loans and their interest rates from 2016-17 and the new rates for 2017-18:

Loan type 2016-17 rate 2017-18 rate
Sub/Unsub Undergraduate 3.76% 4.45%
Unsub Graduate/Professional 5.31% 6.00%
Parent PLUS Loan 6.31% 7.00%

Things to know/remember otherwise:

Student loan rates are set for one year at a time. Around each July 1 we learn what that rate will be.

Student loan rates are fixed for the life of the loan. This means all loans you take for this year will also have this interest rate (i.e., it won’t go up or down), unless you’d decide to consolidate loans later on: a theme for another blog. 😀

Sub vs. Unsub is important! Subsidized means the feds are paying that 4.45% interest that accrues annually while you’re enrolled at least half-time or in a grace period; unsubsidized loans don’t get this assistance, so cost more over the life of the loan. For example, a freshman who takes a $5,500 unsubsidized loan will have accrued almost $250 of interest a year after it’s started accruing interest, where the subsidized loan will have an interest balance of $0 when repayment begins.

Your school determines which loans you receive. With point three above, you’d certainly opt for a subsidized loan, given the choice, no? Well, the school determines which you get based on your FAFSA results and the other types of free aid (scholarships and grants) you receive.

Never borrow for items that are not required for school. This one seems obvious and, like many, you may be in a position where these loans aren’t even enough to cover your basic, required costs, but if you’re fortunate to not need all this money, let it be and leave college with less debt (and presumably less stuff that you’d be buying with your surplus aid 😉).

As ever, contact your local EducationQuest with questions on student loan interest rates or college/financial aid in general!