July 1 Brings Higher Interest Rates on New Federal Student Loans

This post first appeared on ticas.org on June 26th, 2017

July 1 is an important date for students and families: it’s when most changes to federal student aid – both loans and grants – go into effect. For the year starting July 1, 2017, new federal loans for undergraduates, graduate students, and parents will have higher fixed interest rates than loans taken out the year before, and the maximum Pell Grant will be higher. To help inform college borrowing decisions, we have a new, easy-to-read chart with 2017-18 interest rates, loan amounts, and other useful information for the most common types of federal loans.

The coming changes include:

• On July 1, the maximum Pell Grant will be adjusted for inflation to $5,920, up from $5,815. Pell Grants help over 7.5 million lower income students pay for college and limit how much they need to borrow.
  • The new maximum Pell Grant will cover less than 30% of the cost of attending a public four-year college, the smallest share in over 40 years. And under current law, the maximum grant will no longer be tied to inflation after 2017-18.
  • The year round Pell Grant has been restored for 2017-18 and will be available to students beginning July 1, 2017.
• On July 1, the fixed rates for new federal loans will be higher than the rates for loans issued last year.
  • • Stafford loans for undergraduates, subsidized and unsubsidized: 4.45% for loans issued in 2017-18 (up from 3.76% for loans issued in 2016-17).
    • Stafford loans for graduate students: 6.00% for loans issued in 2017-18 (up from 5.31% for loans issued in 2016-17).
    • Parent and Graduate PLUS loans: 7.00% for loans issued in 2017-18 (up from 6.31% for loans issued in 2016-17).
• On October 1, origination fees will decrease slightly for new federal loans.
  • For loans issued October 1, 2017 through September 30, 2018, fees will be 1.066% of principal for all Stafford loans (down from 1.069%) and 4.264% for all PLUS loans (down from 4.276%).

For more information about federal student loans for the coming school year, see our summary chart, Federal Student Loan Terms for 2017-18.