Federal student loan interest rates will increase for next academic year

Federal student loan interest rates are set to rise for the 2022-23 academic year, following the U.S. Treasury Department’s 10-year note auction on Wednesday afternoon. The new rates will be 4.99 percent for undergraduate loans, 6.54 percent for graduate Direct Unsubsidized Loans and 7.54 percent for PLUS loans. These rates will go into effect on July 1, 2022.

Every May, federal student loans are given a new fixed interest rate for the upcoming school year. These rates are calculated by combining the high yield on the 10-year Treasury note with a fixed congressional premium of 2.05 percent. This process took place Monday, resulting in a rate increase for the upcoming year.

While experts predicted the rise in 10-year yields based on the Fed’s recent behavior, students who need to borrow for the next academic year could be surprised by the large increase in student loan rates.

Keep in mind that federal rates are fixed, so rate hikes impact only loans taken out for that specific academic year. Any federal student loans taken out previously will keep their interest rates from the time of origination.