Student loans: Interest rate on new student loans set to go up in July

Look for a jump in student loan interest rates on new loans. — Taking out new student loans will be more expensive come July, when interest rates on those loans will be going up, the U.S. Treasury Department announced Wednesday.

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The increase will apply only to those taking out new student loans. If you have a previous loan, the old interest rate will remain in effect.

Interest rates for federal student loans are set by Congress. As it stands now, interest rates for the loans are tied to the 10-year Treasury yield plus a premium.

Student loan rates are set in the spring, and are effective from July 1 to June 30 of the following year.

The new rates are:

· Direct subsidized and unsubsidized loans for undergraduates: 4.99%, up from 3.73%

· Direct unsubsidized loans for graduates and professionals: 6.54%, up from 5.28%

· Direct PLUS loans for parents and graduate or professional students: 7.54%, up from 6.28%.

For student loan payments that have been suspended due to the COVID-19 pandemic, the rate will not change when student loan payments resume after Aug. 31.

Last month, President Joe Biden said he would consider some sort of student loan forgiveness for loans taken out before and during the pandemic.

“I am considering dealing with some debt reduction. I am not considering $50,000 debt reduction,” Biden said. “But I’m in the process of taking a hard look at whether or not there are going — there will be additional debt forgiveness, and I’ll have an answer on that in the next couple of weeks.”

Biden has signaled he is more comfortable with debt cancellation in the range of $10,000, and previously supported legislation to forgive $10,000 in student debt per borrower.

Biden is also said to be considering some sort of means testing for any student loan relief, White House press secretary Jen Psaki told reporters.

“He has talked in the past about how, you know, he doesn’t believe millionaires and billionaires, obviously, should benefit, so that’s certainly something he would be looking at,” she said.

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