Interest rates on federal student loans are set to increase for the upcoming 2024-2025 school year, according to data from the Department of Education. The interest rate on federal direct undergraduate loans will be 6.53 percent, the highest in 12 years. Graduate students will experience an 8.08 percent interest rate, and PLUS loans for graduate students and parents will have a 9.08 percent interest rate. These rates have not been seen since before July 2006 when fixed rates for student loans were implemented.
The interest rates for federal student loans are determined annually based on the high yield on the auction of the 10-year Treasury note held in May. This year, the Treasury yield has surged as the Federal Reserve has kept interest rates high to combat inflation. The recent 10-year Treasury note auction resulted in a high yield of 4.483 percent.
President Joe Biden has been advocating for student loan forgiveness as part of his efforts to secure support from young voters. His administration has already discharged $153 billion in student loan debt, primarily benefiting borrowers on income-driven repayment plans, borrowers with disabilities, and those who were defrauded by schools. However, the Supreme Court ruled Biden’s large-scale debt forgiveness plan unconstitutional in 2023, citing concerns about the burden it would place on taxpayers who did not incur college debt.
Despite the setback, President Biden has recently revived his debt forgiveness program with a revised plan. The White House has unveiled nine draft rules that would provide cancellation for approximately 30 million borrowers. The new plan would mainly benefit borrowers who entered into student loan repayment plans over 20 years ago and would also benefit those eligible for forgiveness programs like SAVE and PSLF. If implemented, the plan would cancel runaway interest for millions of borrowers.
However, it remains uncertain if the revised plan will face legal challenges. Meanwhile, former President Donald Trump maintains a lead over President Biden in five out of six key battleground states according to recent polling. President Trump’s lead in these states could be a significant factor in future elections.
In conclusion, the increase in interest rates on federal student loans highlights the financial burden faced by students and the ongoing debate surrounding loan forgiveness. President Biden’s efforts to address this issue through his revised debt forgiveness plan may face legal challenges, while the upcoming elections could be influenced by voters’ views on student loan policies.
