Each year, thousands of students and parents rely on Federal Direct loans to assist them with paying for higher education costs. The interest rates on these loans are fixed for the life of the loan but the interest rate on newly issued loans adjusts annually based upon the yield of the last 10-year Treasury auction in May. On May 9, 2018 the 10-year Treasury note had a yield of 2.995% which is up from 2.40% from a year ago.
Use the table below to review 2018-2019 Direct loan interest rates:
Direct Loan Type | 10-year Treasury Note Yield on 5/9/18 | Direct Loan Rate Adjustment | 2018-2019 Direct Loan Fixed Interest Rate | Increase from 2017-2018 Interest Rates |
Percentage Increase from 2017-2018 Rates |
Undergraduate | 2.995% | +2.05% | 5.05% | 0.60% | 13.48% |
Graduate | 2.995% | +3.60% | 6.60% | 0.60% | 10.00% |
Parent PLUS | 2.995% | +4.60% | 7.60% | 0.60% | 8.57% |
Graduate PLUS | 2.995% | +4.60% | 7.60% | 0.60% | 8.57% |
As the table demonstrates, the borrowing costs for undergraduate students rose 13.48% from last year and graduate students will be paying a 10% higher interest rate than they did in the 2017-2018 school year.
Utilizing a reasonable amount of loans in a responsible manner can help pay for some college costs. However, use them as a last resort. Having a well-thought out college funding plan can help minimize or eliminate the need for using loans to pay college costs. Feel free to contact us to see if we can help you with reducing your college costs and paying as efficiently as possible.
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