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Planned Interest Rate Increase
Scheduled for July 1, 2017

Policy Summary

New Student loan borrowers will see a jump in their interest rates beginning in July. Interest rates on new government loans are set to rise by 0.69 percentage point (from 3.76 percent to 4.45 percent) nearly a 20 percent increase for undergraduate borrowers. Some graduate loan rates will also rise from 5.31 percent to 6 percent and loans for parents and guardians are also expected to see a jump from 6.31 percent to 7 percent. This increase has its roots in a 2013 provision to change how the federal government sets interest rates on student loans, moving away from a system in which Congress defined rates years in advance, to one in which rates would be tied to the the government’s cost of borrowing over 10 years. The goal was to create an environment in which students would benefit from low interest rates when the economy wasn’t growing very much. LEARN MORE

Analysis

About 42 million Americans collectively owe roughlyn$1.3 trillion on their student loans, as it is. This increase terrifying to many because following years of tuition hikes, this is just another step towards making college education a lifelong financial burden.”It makes it even scarier,” said ASU graduate student Guadalupe Vela. “I’m not sure I’m going to be able to afford the interest on my unsubsidized loan.” Still, some financial experts say that although the increase isn’t ideal, federal loans are still better than the private alternative. “Since their interest rates are fixed, they won’t go up in the future, and they also come with crucial protections like income-driven repayment and forgiveness for public-sector workers,” said Brianna McGurran of the personal finance website NerdWallet. LEARN MORE

Engagement Resources

  • Student Debt Crisis – A nonprofit organization, Student Debt Crisis is dedicated to reforming student debt and higher education loan policies.
  • Contact your state legislators – Call your representatives and let them know that college affordability is important to you!
  • Student Loan Borrower Assistance Project – A project of the National Consumer Law Center, the SLBAP is a resource for borrowers, their families, and advocates representing student loan borrowers.

This brief was compiled by Cindy Stansbury. If you have comments or want to add the name of your organization to this brief please contact, cindy@usresistnews.org.


 

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