College students expecting to return to school in the fall will see higher interest on their federal student loans.
The fixed interest rate on federal student loans increased from 2.75 percent to 3.73 percent for undergraduate loans issued between July 1 through June 30, 2022.
The fixed-rate for Direct PLUS loans, which can be taken out by parents or graduate-level students, jumped to 6.28 percent, up from 5.3 percent.
Although the interest rate changes may seem like sweeping hikes, the rates are still low compared to pre-pandemic levels.
“Last year’s interest rates were at or near record lows,” Mark Kantrowitz, a student loan expert and author of How to Appeal for More College Financial Aid, told the Detroit Free Press.
Kantrowitz added that the 3.73 fixed interest rate for undergraduate federal student loans is still relatively small compared to the one for the 2019–20 academic year, or 4.529 percent and 5.045 percent the school year prior.
Congressional Democrats, student loan advocacy groups and Education Department officials are pushing the president to extend the freeze on federal student loan payments and maintain zero interest accrual, arguing that borrowers are still suffocating in financial turmoil due to the impacts of the pandemic.
Borrowers first saw that relief program when former President Donald Trump signed the Cares Act in March 2020. Trump then pushed the relief deadline twice, followed by Biden who extended the pause until the end of September 2021.
“We’re calling on the administration to extend the pause on student loan payments to help support Arizona families as we continue our coronavirus recovery,” Sen. Kyrsten Sinema (D-Ariz.), who joined more than 60 Democrats in writing a letter to the president in June, tweeted last week. “Extending the current pause on federal student loan payments will provide relief to Arizonans and help them continue to recover from the coronavirus recession.”
Biden is also facing calls from Democrats to implement a widespread student loan cancellation measure, amounting up to $50,000 per federal student loan borrower.
But the president and department officials have already canceled more than $3 billion in student loan debt since the president took the White House, upholding a portion of Biden’s campaign pledge to lessen the student loan burden on the 44.7 million borrowers.
Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.