- The Federal Student Aid Bureau announced new interest rates for student loans starting in July.
- Rates are rising by almost a full percentage point from last year.
- The pause in student loan payments and interest will resume in September.
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Although the pause in student loan repayments, accompanied by zero interest, continues until September, the Federal Student Aid Administration (FSA) announced a new increase in interest rates for the next year. This is another sign that the $ 1.7 trillion student debt crisis that President Joe Biden promised to resolve during his campaign last year will continue to grow.
Interest rates are reset every July, and student loan interest will rise by almost a full percentage point this year. FSA published new interest rates for direct subsidized and unsubsidized loans for students, direct unsubsidized loans for graduates and professionals, and direct PLUS loans for parents, graduate students or professional students.
Here are the new interest rates that will be paid after July 1, 2021 and until July 1, 2022:
- Direct subsidized and unsubsidized loans for students: 3.73%, up to 2.75%;
- Direct unsubsidized loans for graduates and specialists: 5.28%, growth from 4.3%;
- Direct PLUS Credits for Parent and Graduate or Professional Students: 6.28%, an increase from 5.3%.
Forbes reported that the new interest rates will cost borrowers an additional $ 590 for every $ 10,000 borrowed for a 10-year maturity, but despite the increase, rates remain relatively low compared to previous years.
Biden extended the suspension of zero-interest student loan payments until September to provide relief from the pandemic, and Insider previously reported that the pause in payments has greatly helped borrowers to stay financially afloat during the pandemic.
Payments are due to resume in a few months, however, and although Education Minister Miguel Cardona said in May that he has not excluded extending the pause, no action was taken for this.
BUT report Published April 5 by Upgraded Points – a travel research group – found that the pause in payments saved borrowers an average of $ 2,001 in interest, and noted that “while that couple of thousand dollars could be mandatory to keep borrowers in trouble time of a pandemic, the difficulties associated with this, these borrowers are still far from getting out of the holes they dug in college. “
This is why Democrats are pushing for a $ 50,000 student debt write-off for each borrower, arguing that it will bring immediate relief to borrowers if Biden uses his executive powers to do so.
“Canceling the $ 50,000 student loan debt would be one of the most effective executive actions President Biden could take to provide strong stimulus to our economy and help narrow the racial wealth gap,” said Massachusetts Senator Elizabeth Warren. wrote on Twitter on Monday. “Let’s do it.”