Federal student loan interest rates for the 2023-24 academic year are live, and they are the highest they’ve been in at least a decade. Interest rates for undergraduate direct subsidized loans, for example, haven’t been this high since hitting 5.6% for the 2009-10 school year.
The new rates apply to all loans taken out from July 1, 2023, to June 30, 2024, according to the Education Department. The interest rate for an undergraduate direct loan is 5.5%. Graduate students taking out direct loans will face a 7.05% interest rate. PLUS loans for graduate students and parents come with an 8.05% interest rate. Here’s how the new student loan interest rates compare with the 2022-23 academic year:
- Direct subsidized and unsubsidized loans for undergraduate students: 5.5% for the 2023-24 academic year; up from 4.99% for the 2022-23 academic year.
- Direct unsubsidized loans for graduate students: 7.05% for the 2023-24 academic year; up from 6.54% for the 2022-23 academic year.
- PLUS loans for graduate students and parents: 8.05% for the 2023-24 academic year; up from 7.54% for the 2022-23 academic year.
“For students and families considering new federal loans, it’s crucial to carefully evaluate the implications of these rate changes,” the National Foundation for Credit Counseling, a nonprofit consumer advocate agency, said in a statement.
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Though federal student loans are getting more expensive, they’re still usually a better deal than private alternatives.
What higher interest rates mean for incoming and current students
As interest rates rise, you pay back more on the amount you borrow.
For example, a $5,000 unsubsidized federal direct undergraduate loan on a standard 10-year repayment term would cost you $1,361 in total interest at the 2022-23 interest rate of 4.99%. If you borrow the same amount for the 2023-24 school year at the new 5.5% rate, assuming the same repayment term, you’ll pay an additional $150 in interest.
Keep in mind that the new federal interest rates apply to federal student loans taken out for the 2023-24 academic year only. Existing federal loans aren’t impacted by the new rates.
The federal student loan interest rate bump comes as the cost of borrowing increases for consumers across the board, in areas like car loans, mortgages and even private student loans.
Fixed rates on private student loans have generally trended upward over the past year, according to an April 2023 NerdWallet analysis. If you’re supplementing financial aid with private student loans, you’ll likely feel the impact of higher interest rates a little more.
Comparing federal and private student loan interest rates
Though federal student loans are getting more expensive, they’re still usually a better deal than private alternatives, and borrowers should use federal loans before they consider private loans. Fixed interest rates advertised by private lenders range from 5.99% to 13.78%, and variable interest rates are around 5.61% to 13.27%, based on a May 2023 NerdWallet analysis.
Federal student loans have a fixed interest rate that is set by Congress annually. Interest rates for private student loans can be fixed — locked in for the life of the loan — or variable.
Also, the rate offered by private lenders can vary based on income, credit score and other factors used to determine a borrower’s ability to repay. Federal student loan interest rates don’t depend on those factors. All eligible borrowers will receive the same predetermined rate.
But in addition to comparing interest rates, there are also other factors to consider.
Federal loans come with benefits that protect borrowers, like repayment programs based on income and loan forgiveness for those who qualify. Private loans lack these options.
It can also be harder to qualify for favorable loan terms with a private lender. You’ll typically need a credit score of 600 or higher, or a co-signer with strong credit, to get the lowest advertised rates. Most federal student loans don’t require a credit check or co-signer.
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Federal student loan interest rates are now the highest they’ve been in a decade
Canva
Millions of student loan borrowers will soon be adding a monthly student loan payment on top of the other household bills like credit cards and car loans. On pause since March 13, 2020, federal student loan payments will resume on the first day of October 2023, with interest accrual restarting in September.
The Biden administration's plan to cancel some or all of the student debt of millions of borrowers was overturned by the Supreme Court on June 30, 2023, though the president said in the wake of the court's decision that he's taking a look at different plans to approach the issue again.
In this analysis, Experian explores what monthly payments will be like for many borrowers once repayment resumes, as well as some new approaches to student debt relief programs.
Canva
Millions of student loan borrowers will soon be adding a monthly student loan payment on top of the other household bills like credit cards and car loans. On pause since March 13, 2020, federal student loan payments will resume on the first day of October 2023, with interest accrual restarting in September.
The Biden administration's plan to cancel some or all of the student debt of millions of borrowers was overturned by the Supreme Court on June 30, 2023, though the president said in the wake of the court's decision that he's taking a look at different plans to approach the issue again.
In this analysis, Experian explores what monthly payments will be like for many borrowers once repayment resumes, as well as some new approaches to student debt relief programs.
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Federal student loan interest rates are now the highest they’ve been in a decade
Experian
Student loan borrowers will start to make an average payment of $203 later this summer toward their student loan balances, according to a data analysis by Experian, assuming no further reductions in the average due to student loan forgiveness. And while that's not as much as most car loan payments these days, it's yet another financial obligation for consumers who are already dealing with higher costs across the board due to inflation.
It's difficult to imagine a good time for a new large monthly bill to arrive for most consumers, but 2023 certainly isn't it. Consumers are already fighting inflation—especially for rental and home costs—as well as higher interest rates for loans and credit cards. Both these factors are already eating into the savings people amassed over the past few years. One silver lining: Unemployment rates remain low, so fewer consumers are experiencing disruptions in income.
Experian
Student loan borrowers will start to make an average payment of $203 later this summer toward their student loan balances, according to a data analysis by Experian, assuming no further reductions in the average due to student loan forgiveness. And while that's not as much as most car loan payments these days, it's yet another financial obligation for consumers who are already dealing with higher costs across the board due to inflation.
It's difficult to imagine a good time for a new large monthly bill to arrive for most consumers, but 2023 certainly isn't it. Consumers are already fighting inflation—especially for rental and home costs—as well as higher interest rates for loans and credit cards. Both these factors are already eating into the savings people amassed over the past few years. One silver lining: Unemployment rates remain low, so fewer consumers are experiencing disruptions in income.
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Federal student loan interest rates are now the highest they’ve been in a decade
Experian
Household debt is growing at its fastest pace in 20 years. Higher interest rates on some of that debt, like credit cards, ensure that households may face continued pressure in paying their debts throughout the remainder of 2023.
Among all generations, the percentage of household income that's devoted to debt repayment remains steady, Federal Reserve data shows. And while this so-called debt service ratio isn't rising overall, it is rising for some borrowers and falling for others. Most student loan borrowers are millennials, and their expenses generally rise as they age. Meanwhile, older consumers are less likely to be burdened as much by loan and mortgage payments.
Crucially, student loan payments will impact younger borrowers even more when they resume. Millennials carry nearly half of outstanding student loan debt in 2023, making them the generation that stands to bear the brunt of resumed student loan payments.
Student Loan Borrowers on Pause Improved Their Credit Scores as Much as Other Consumers
Consumers with student loan debt in 2022 have slightly lower average credit scores than the population at large, according to the study. As of the third quarter (Q3) of 2023, the average FICO Score of a student loan borrower was 693, somewhat lower than the national average FICO score of 714. However, the current average score among student loan borrowers is 11 points higher than it was in 2019—roughly the same growth experienced by those without student loans.
Two factors inform the 20-point FICO Score difference between student loan borrowers and the general population. One is the demographic difference: Most student loan borrowers are under 40 years of age (although older borrowers with student loan balances are becoming more common). And while age isn't a factor in calculating one's credit score, the length of one's credit history is, and longer histories are beneficial. For the most part, student loan borrowers carry and repay balances when their credit history is still in its early stages.
The second reason for lower scores among student loan borrowers is the financial burden many student loan borrowers continue to carry, even after a three-year payment pause on their loans. And although most student loan borrowers were current on their loans prior to the initial student loan pause in 2020, delinquencies and defaulted loans are greater for student loans than any other type of consumer loan. As making on-time payments is crucial toward maintaining and improving one's credit score, the relatively higher delinquencies and defaults among student loan borrowers ultimately translate to lower average FICO Scores for these consumers.
Other Offramps for Student Loan Borrowers
The Supreme Court ruled against the loan forgiveness of up to $20,000 for those making under $125,000, but borrowers can consider other approaches to help lower some of their balances, including new programs announced by the federal government following the decision.
- Public Service Loan Forgiveness programs have quietly accelerated the pace at which they've been granted. Currently, more than 500,000 loan borrowers received loan forgiveness, with the average loan size exceeding $68,000—many times the $10,000 or $20,000 offered to some borrowers last August. It's possible that this program expands its reach in upcoming months.
- Workplace student loan benefit programs were already beginning to take root in U.S. corporations before the student loan pause took effect in 2020. When payments resume, there's reason to think more employers, eager to attract and retain workers, will begin to offer loan repayments as a workplace benefit—something only 7% of companies offer today. Aside from the obvious financial relief, these corporate benefits can also reduce some of the administrative headache of paying back loans, including, in some cases, making the payment directly to the loan servicer—a point of friction for some student loan borrowers.
- Income-driven repayment plans are a collection of repayment plans that are keyed toward the income of the student loan borrower. They generally cap repayments based on a percentage of a borrower's income. Prior to the court's decision, there were four types of income-driven plans. Following the ruling, the U.S. Department of Education announced another new income-based repayment plan called Saving on a Valuable Education (SAVE), which the administration states will reduce monthly payments to zero for low-income borrowers, capping undergraduate loan repayment at 5% of discretionary income.
- A new 12-month transition period is designed to help borrowers restart loan repayments and avoid delinquency or loan defaults. In a statement released June 30 in the wake of the Supreme Court decision, Education Secretary Miguel Cardona encouraged borrowers to continue making payments during this grace period if they're able to, since interest will continue to accrue.
With payments (and interest) paused throughout the pandemic, the total balance of outstanding student loan debt has declined slightly from its peak of $1.59 trillion in September 2021, according to the study. Programs and benefits like those listed above may drive down total outstanding student loan balances even further, independent of the Supreme Court decision in June.
Methodology
The analysis results provided are based on an Experian-created statistically relevant aggregate sampling of the company's consumer credit database that may include use of the FICO Score 8 version. Different sampling parameters may generate different findings compared with other similar analysis. Analyzed credit data did not contain personal identification information. Metro areas group counties and cities into specific geographic areas for population censuses and compilations of related statistical data.
This story was produced by Experian and reviewed and distributed by Stacker Media.
Experian
Household debt is growing at its fastest pace in 20 years. Higher interest rates on some of that debt, like credit cards, ensure that households may face continued pressure in paying their debts throughout the remainder of 2023.
Among all generations, the percentage of household income that's devoted to debt repayment remains steady, Federal Reserve data shows. And while this so-called debt service ratio isn't rising overall, it is rising for some borrowers and falling for others. Most student loan borrowers are millennials, and their expenses generally rise as they age. Meanwhile, older consumers are less likely to be burdened as much by loan and mortgage payments.
Crucially, student loan payments will impact younger borrowers even more when they resume. Millennials carry nearly half of outstanding student loan debt in 2023, making them the generation that stands to bear the brunt of resumed student loan payments.
Student Loan Borrowers on Pause Improved Their Credit Scores as Much as Other Consumers
Consumers with student loan debt in 2022 have slightly lower average credit scores than the population at large, according to the study. As of the third quarter (Q3) of 2023, the average FICO Score of a student loan borrower was 693, somewhat lower than the national average FICO score of 714. However, the current average score among student loan borrowers is 11 points higher than it was in 2019—roughly the same growth experienced by those without student loans.
Two factors inform the 20-point FICO Score difference between student loan borrowers and the general population. One is the demographic difference: Most student loan borrowers are under 40 years of age (although older borrowers with student loan balances are becoming more common). And while age isn't a factor in calculating one's credit score, the length of one's credit history is, and longer histories are beneficial. For the most part, student loan borrowers carry and repay balances when their credit history is still in its early stages.
The second reason for lower scores among student loan borrowers is the financial burden many student loan borrowers continue to carry, even after a three-year payment pause on their loans. And although most student loan borrowers were current on their loans prior to the initial student loan pause in 2020, delinquencies and defaulted loans are greater for student loans than any other type of consumer loan. As making on-time payments is crucial toward maintaining and improving one's credit score, the relatively higher delinquencies and defaults among student loan borrowers ultimately translate to lower average FICO Scores for these consumers.
Other Offramps for Student Loan Borrowers
The Supreme Court ruled against the loan forgiveness of up to $20,000 for those making under $125,000, but borrowers can consider other approaches to help lower some of their balances, including new programs announced by the federal government following the decision.
- Public Service Loan Forgiveness programs have quietly accelerated the pace at which they've been granted. Currently, more than 500,000 loan borrowers received loan forgiveness, with the average loan size exceeding $68,000—many times the $10,000 or $20,000 offered to some borrowers last August. It's possible that this program expands its reach in upcoming months.
- Workplace student loan benefit programs were already beginning to take root in U.S. corporations before the student loan pause took effect in 2020. When payments resume, there's reason to think more employers, eager to attract and retain workers, will begin to offer loan repayments as a workplace benefit—something only 7% of companies offer today. Aside from the obvious financial relief, these corporate benefits can also reduce some of the administrative headache of paying back loans, including, in some cases, making the payment directly to the loan servicer—a point of friction for some student loan borrowers.
- Income-driven repayment plans are a collection of repayment plans that are keyed toward the income of the student loan borrower. They generally cap repayments based on a percentage of a borrower's income. Prior to the court's decision, there were four types of income-driven plans. Following the ruling, the U.S. Department of Education announced another new income-based repayment plan called Saving on a Valuable Education (SAVE), which the administration states will reduce monthly payments to zero for low-income borrowers, capping undergraduate loan repayment at 5% of discretionary income.
- A new 12-month transition period is designed to help borrowers restart loan repayments and avoid delinquency or loan defaults. In a statement released June 30 in the wake of the Supreme Court decision, Education Secretary Miguel Cardona encouraged borrowers to continue making payments during this grace period if they're able to, since interest will continue to accrue.
With payments (and interest) paused throughout the pandemic, the total balance of outstanding student loan debt has declined slightly from its peak of $1.59 trillion in September 2021, according to the study. Programs and benefits like those listed above may drive down total outstanding student loan balances even further, independent of the Supreme Court decision in June.
Methodology
The analysis results provided are based on an Experian-created statistically relevant aggregate sampling of the company's consumer credit database that may include use of the FICO Score 8 version. Different sampling parameters may generate different findings compared with other similar analysis. Analyzed credit data did not contain personal identification information. Metro areas group counties and cities into specific geographic areas for population censuses and compilations of related statistical data.
This story was produced by Experian and reviewed and distributed by Stacker Media.
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Srirat Pongcharoen // Shutterstock
Student loan debt has plagued college graduates for years, with current U.S. debt levels hitting a record-breaking $1.76 trillion. Nationwide, student loan debt decreased since the start of the pandemic, in part due to economic relief efforts such as the CARES Act. While there was a 2.7% increase in 2021 compared to 2020, this represents the lowest year-over-year increase in the last decade—even with the lengthy pause on federal student loan payments due to the COVID-19 pandemic. President Biden announced another extension for federal student loan borrowers until Aug. 31, 2022, to further provide relief.
Student loan debt plays a huge role in restricting financial freedom. Compared to other generations, more millennials have some form of student loan debt. Although they don't have the highest average debt compared to other generations like Gen Xers or baby boomers, about 14.8 million millennials still had some amount of student loan debt to repay, according to Education Data. It’s been one of the reasons why millennials have held off on big purchases such as buying a home; their aversion to debt precludes them from taking out additional loans, including mortgages.
Sound Dollar ranked the states with the highest percentage of student loan delinquencies using 2021 data from FRBNY Consumer Credit Panel/Equifax. States are sorted based on their proportion of student loan borrowers with accounts 90-plus days past due. The dataset also includes the overall total number of student loan borrowers in each state as well as the average student debt balance for each state. Both federal and private student loans are covered in this dataset.
Of all the states mentioned on this list, 10 out of 13 are located in the Southern region of the U.S. Student loan debt is also the second-highest consumer debt category, with mortgages being first. The Federal Reserve dataset lists the average student debt balance among borrowers across the U.S. as $36,200.
Srirat Pongcharoen // Shutterstock
Student loan debt has plagued college graduates for years, with current U.S. debt levels hitting a record-breaking $1.76 trillion. Nationwide, student loan debt decreased since the start of the pandemic, in part due to economic relief efforts such as the CARES Act. While there was a 2.7% increase in 2021 compared to 2020, this represents the lowest year-over-year increase in the last decade—even with the lengthy pause on federal student loan payments due to the COVID-19 pandemic. President Biden announced another extension for federal student loan borrowers until Aug. 31, 2022, to further provide relief.
Student loan debt plays a huge role in restricting financial freedom. Compared to other generations, more millennials have some form of student loan debt. Although they don't have the highest average debt compared to other generations like Gen Xers or baby boomers, about 14.8 million millennials still had some amount of student loan debt to repay, according to Education Data. It’s been one of the reasons why millennials have held off on big purchases such as buying a home; their aversion to debt precludes them from taking out additional loans, including mortgages.
Sound Dollar ranked the states with the highest percentage of student loan delinquencies using 2021 data from FRBNY Consumer Credit Panel/Equifax. States are sorted based on their proportion of student loan borrowers with accounts 90-plus days past due. The dataset also includes the overall total number of student loan borrowers in each state as well as the average student debt balance for each state. Both federal and private student loans are covered in this dataset.
Of all the states mentioned on this list, 10 out of 13 are located in the Southern region of the U.S. Student loan debt is also the second-highest consumer debt category, with mortgages being first. The Federal Reserve dataset lists the average student debt balance among borrowers across the U.S. as $36,200.
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
fizkes // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 373,900
- Average student debt balance: $32,400
fizkes // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 373,900
- Average student debt balance: $32,400
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Mark Hayes // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 586,000
- Average student debt balance: $33,400
Mark Hayes // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 586,000
- Average student debt balance: $33,400
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
fizkes // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 614,900
- Average student debt balance: $37,500
fizkes // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 614,900
- Average student debt balance: $37,500
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Robert Gebbie Photography // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 639,300
- Average student debt balance: $35,000
Robert Gebbie Photography // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 639,300
- Average student debt balance: $35,000
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
fizkes // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 748,800
- Average student debt balance: $37,200
fizkes // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 748,800
- Average student debt balance: $37,200
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Chaay_Tee // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 867,800
- Average student debt balance: $36,200
Chaay_Tee // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 867,800
- Average student debt balance: $36,200
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-
About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Damir Khabirov // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 926,500
- Average student debt balance: $32,900
Damir Khabirov // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 926,500
- Average student debt balance: $32,900
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Oxanaso // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 1,639,600
- Average student debt balance: $41,600
Oxanaso // Shutterstock
- Delinquency rate: 9%
- Total number of borrowers: 1,639,600
- Average student debt balance: $41,600
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Muk Photo // Shutterstock
- Delinquency rate: 10%
- Total number of borrowers: 215,900
- Average student debt balance: $32,500
Muk Photo // Shutterstock
- Delinquency rate: 10%
- Total number of borrowers: 215,900
- Average student debt balance: $32,500
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Andreassolbakken // Shutterstock
- Delinquency rate: 10%
- Total number of borrowers: 217,700
- Average student debt balance: $34,400
Andreassolbakken // Shutterstock
- Delinquency rate: 10%
- Total number of borrowers: 217,700
- Average student debt balance: $34,400
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
wutzkohphoto // Shutterstock
- Delinquency rate: 10%
- Total number of borrowers: 346,200
- Average student debt balance: $35,800
wutzkohphoto // Shutterstock
- Delinquency rate: 10%
- Total number of borrowers: 346,200
- Average student debt balance: $35,800
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Tero Vesalainen // Shutterstock
- Delinquency rate: 10%
- Total number of borrowers: 474,100
- Average student debt balance: $32,100
Tero Vesalainen // Shutterstock
- Delinquency rate: 10%
- Total number of borrowers: 474,100
- Average student debt balance: $32,100
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About 2 million people are about to get a new student loan servicer. Here’s what you need to know
Andrey_Popov // Shutterstock
- Delinquency rate: 11%
- Total number of borrowers: 417,600
- Average student debt balance: $37,500
This story originally appeared on Sound Dollar and was produced and distributed in partnership with Stacker Studio.
Andrey_Popov // Shutterstock
- Delinquency rate: 11%
- Total number of borrowers: 417,600
- Average student debt balance: $37,500
This story originally appeared on Sound Dollar and was produced and distributed in partnership with Stacker Studio.
How to minimize student loan costs
Even when interest rates are high, there are still ways to minimize the amount that you borrow.
Submit the FAFSA. The Free Application for Federal Student Aid is your ticket to federal financial aid — including money you don’t have to pay back, like grants, scholarships and work-study programs.
Prioritize “free money.” Outside of federal aid, you can apply for scholarships and grants through nonprofit organizations or with your school directly. These alternative funding options can alleviate the burden of student loans, advised the NFCC.
Max out federal student loans before borrowing from private lenders. Federal loans will likely be the most affordable route, and you’ll have access to income-driven repayment programs and other protections to make paying your student loan bills more manageable
Factor in future earnings. Investing in education can be a wise long-term decision. But it’s essential to compare the cost to potential future earnings, according to the NFCC. One rule of thumb is to avoid borrowing more than your expected starting salary once you graduate.
Consider making in-school payments on your loans. Payments on federal loans and many private loans can be deferred while you’re in school. So you don’t have to pay while in school, but you can.
If you have a federal unsubsidized loan, interest will accrue while you’re in school. Making payments while in school will decrease the amount of interest that’s added to your loan once you begin repayment. In-school payments to subsidized loans will go straight to the principal. Both strategies will decrease your overall loan costs.
For private loans, making on-time, in-school payments can result in a potentially lower interest rate, said Chris Ebeling, head of student lending at Citizens, a private financial institution. It can also help you build credit, which can be helpful for post-graduate life when you’re looking to rent an apartment or buy a car.
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