Students and parents planning to borrow federal student loans between July 1, 2014 and June 30, 2015 will be paying more in interest than they did in the 2013-2014 school year. Federal student loan interest rates are tied to the 10-year Treasury. The yield of the auction held today was 0.80% higher than last year’s which means federal student loan interest rates will increase by the same margin. Here is a breakdown of the new federal student loan interest rates by program:
|Federal Student Loan Interest Rates 2014-2015|
|Direct Subsidized/Unsubsidized Student Loans – Undergraduates||4.66%|
|Direct Unsubsidized Student Loans – Graduate Students||6.21%|
|Direct PLUS Loan for Graduate and Professional Students||7.21%|
|Direct PLUS Loan for Parents||7.21%|
Federal student loan rates are locked in for the period in which they are borrowed. The new, higher rates will only apply to loans borrowed in the 2014-2015 academic year. Rates will be reset again during the 10-year Treasury note auction held the prior for June 1, 2015 for the 2015-2016 school year.
With the rise in rates all but assured, Senator Elizabeth Warren, along with 22 Democrat co-sponsors introduced legislation yesterday aimed at allowing borrowers of either federal or private student loans to refinance at today’s low rates. Student loans held by the Department of Education have generated over $65 billion in revenue over the past few years. Mass consolidation of previously ineligible loans is likely to eliminate that profit. Warren proposes increasing taxes on the wealthiest of Americans to cover the revenue shortfall. As such, the legislation isn’t likely to garner the bipartisan support needed to move forward unless a compromise on how to pay for it can be offered.