WASHINGTON (AP) -
Interest rates go up Tuesday for students taking out new federal loans. This
hike is relatively minimal but could foreshadow more increases to come.
The change stems
from a high-profile, bipartisan deal brokered last year by Congress and
signed by President Barack Obama that ties the rates to the financial
Interest rates go
from 3.86 to 4.66 percent on undergraduate Stafford loans. Graduate student
loans go from 5.41 percent to 6.21 percent. Interest rates on Plus loans for
parents go from 6.41 percent to 7.21 percent.
For every $10,000
borrowed, the average borrower under the hike will pay back about $4 more
every month when they begin paying back the money - about the price of a
If the economy
continues to improve, however, these kinds of rate hikes could continue.
Congress stipulated that the rates for new loans be reset annually, but that
borrowers keep the rate they were given for the life of the loan.
The compromise in
Congress was reached after rates doubled last July.
Students take out
new loans each year, so by the time they graduate they could be repaying
loans that have different interest rates.
publisher of edvisors.com, estimates that today’s freshman could potentially
see rates the same or higher than they were when Congress acted by the time
they graduate. When Congress acted, rates for undergraduate students were at
“The real concern
is that the interest rates have nowhere to go but up,” Kantrowitz said.
The deal did
include some caps. Interest rates will not top 8.25 percent for
undergraduates. Graduate students will not pay rates higher than 9.5
percent, and parents’ rates top out at 10.5 percent.