The federal student aid office announced new interest rates for student loans starting in July.
Rates are up almost a percentage point from last year.
The pause on student loan payments and the lack of accrued interest is expected to resume in September.
Although the pause on student loan payments, accompanied by zero accrued interest, continues through September, the Federal Student Aid Office (FSA) has announced a further increase in interest rates for the year. next. It’s another sign that the $ 1.7 trillion student debt crisis, which President Joe Biden pledged to tackle during his campaign last year, will continue to grow.
Interest rates are reset every year in July, and this year, interest on student loans will increase by almost a percentage point. FSA job new interest rates for subsidized and non-subsidized direct loans for undergraduates, direct unsubsidized loans for graduates and professionals, and direct PLUS loans for parents and graduate or professional students.
Here are the new interest rates to be paid after July 1, 2021 and before July 1, 2022:
Subsidized and Unsubsidized Direct Loans for Undergraduates: 3.73%, against 2.75%;
Non-subsidized direct loans for graduates and professionals: 5.28%, against 4.3%;
Direct PLUS loans for parents and graduate or professional students: 6.28%, against 5.3%.
Forbes reported that the new interest rates will cost borrowers up to $ 590 more per $ 10,000 borrowed over a 10-year repayment term, but despite the increase, rates are still relatively low compared to previous years .
Biden expanded the pause on student loan payments, without interest, until September to alleviate the pandemic, and Insider previously reported that the payment pause has significantly helped borrowers stay afloat during the pandemic.
However, payments are expected to resume in a few months, and although Education Secretary Miguel Cardona said in May he had not excluded further extending the break, no action has yet been taken to do so.
A report published on April 5 by Upgraded Points – a travel research group – found that the hiatus on payments saved borrowers on average only $ 2,001 in interest and noted that “although those few thousands of dollars could have been imperative to keep borrowers in the dark during the pandemic – difficulties associated, these borrowers are still a long way from emerging from the holes they dug at the university. “
That’s why Democrats are asking for $ 50,000 for student debt cancellation per borrower, arguing it would provide immediate relief to borrowers if Biden used his executive power to do so.
“Canceling $ 50,000 in student debt would be one of the most effective executive measures President Biden could take to massively stimulate our economy and help close the racial wealth gap,” said Massachusetts Senator Elizabeth Warren. wrote on Twitter Monday. “Let’s do this.”
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