Are you or one of your children still in college or graduate school? Will you be taking out federal student loans to help pay for it? If so, then the cost of doing so has just gone up. The interest rates on new Federal student loans have increased based on a law passed by Congress last year.
Rates for new loans have changed as follows:
- Undergraduate Stafford loans increased from 3.86 to 4.66 percent;
- Graduate Stafford loans increased from 5.41 to 6.21 percent; and
- Parent PLUS loans increased from 6.41 to 7.21 percent.
Those rates will stay the same for the life of the loan. Fortunately, the new rates do not have any effect on existing student loans that borrowers have taken out in the past.
Even with these increases, a federal Stafford loan is still better than a New Jersey CLASS loan, which currently stands at 6.95% for a 10-year fixed note (although HESAA states that loans are available for 6.65% “for a limited time”).
If you are looking for a way to supplement Stafford money, a Parent PLUS loan is still a better option, even at 7.21%. The payment plans available from the Department of Education can make repayment much easier, even at a rate that is 0.26% higher.
If you would like more information about student loans, you can dowload my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.