Question of the Day: What's the new interest rate on federal student loans for 2020-21 school year?

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May 18, 2020
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Student Loans, Question of the Day, Paying for College

Answer: 2.75%

Questions:

  • How does this interest rate for undergraduates (at 4 year colleges) compare to historical averages?
  • How does the interest rates on graduate loans (GradPLUS) and parent loans (PLUS) compare to undergraduate loans? 
  • Reading the footnotes on the graph, what determines the interest rate on federal student loans and how often is this rate adjusted?

Click here for the ready-to-go slides for this Question of the Day that you can use with your students. 

Behind the numbers (Marketplace):

“It is a big drop, and I think it’s a reflection of the cuts to interest rates due to the pandemic,” said Mark Kantrowitz, who publishes the online resource Saving for College.

The U.S. Department of Education has yet to officially announce the new rates, but they are calculated based on the high yield of the last 10-year Treasury Note auction in May, which took place Tuesday.

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About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.