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Federal Student Loan Interest Rates Decrease for 2019-2020

Posted by Rich Grant on November 25, 2019 in Financial Planning

Student loan interest rates

Every year, federal student loan interest rates on new federal student loans are reset by Congress for the upcoming academic year. For the first time in three years, interest rates will decrease in 2019-2020 for borrowers. The lower rates apply only to new federal student loans disbursed between July 1, 2019, and June 30, 2020 and include Direct:

  • Stafford Loans for Undergraduates (subsidized or unsubsidized) — 4.53% (5.05% for 2018-2019)
  • PLUS Loans for Parents and Graduate Students — 7.08% (7.6% for 2018-2019)
  • Stafford Loans for Graduate Students (unsubsidized only) — 6.08% (6.6% for 2018-2019)

Subsidized vs. unsubsidized

What’s the difference? With subsidized loans, the federal government pays the interest that accrues while the student is in school, during the six-month grace period after graduation, and during any loan deferment periods. Subsidized loans are based on financial need. With unsubsidized loans, the borrower is responsible for paying the interest during these periods. Only undergraduate students are eligible for subsidized loans, and eligibility is based on demonstrated financial need.

Detail for the Federal Student Loan Interest Rates

New rate 2019-2020 Old rate 2018-2019 Available to Borrowing limits

Direct Stafford Loans: Undergraduates

(Subsidized)

4.53%

5.05%

Undergraduate students only

Subsidized loans are based on financial need as determined by the federal aid application (FAFSA)

For dependent undergraduates:

1st year: $5,500 (max $3,500 subsidized)

2nd year: $6,500 (max $4,500 subsidized)

3rd, 4th, 5th year: $7,500 (max $5,500 subsidized)

Max: $31,000 (max $23,000 subsidized)

Direct Stafford Loans: Undergraduates

(Unsubsidized)

4.53%

5.05%

Undergraduate students only; all students are eligible regardless of financial need

For dependent undergraduates:

1st year: $5,500 (max $3,500 subsidized)

2nd year: $6,500 (max $4,500 subsidized)

3rd, 4th, 5th year: $7,500 (max $5,500 subsidized)

Max: $31,000 (max $23,000 subsidized)

Direct Stafford Loans: Graduate or Professional Students

6.08%

6.6%

Graduate or professional students only; all students are eligible regardless of financial need

Unsubsidized loans only

$20,500 per year; max $138,500

Direct PLUS Loans:

Parents and Graduate or Professional Students

7.08%

7.6%

Parents of dependent undergraduate students and graduate or professional students

Unsubsidized loans only

Total cost of education, minus any other aid received by student or parent

Food for Thought

As you think about paying for college you might consider tax efficient ways to save and grow your money as well as other alternative sources of funds. Qualified Tuition Plans: 529 Plans and Paying for College Cash or Credit are two articles which will give you food for thought.
Prepared by Broadridge Investor Communication Solutions, Inc. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes. We cannot assure the accuracy or completeness of these materials and the information in these materials may change at any time and without notice.

 

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