Heads up everyone: The new interest rates on federal student loans are here. And fortunately, this year, they’re just a little bit cheaper.

The 2015-2016 federal student loan interest rates, which took effect July 1st, are more than 1/3 of a percentage point less expensive than last year’s rates.

Granted, these yearly fluctuations in interest rates are not some extraordinarily rare — they’re something that has, and will continue to happen annually, as a natural consequence of market fluctuations.

That said, read on to learn 5 simple facts you need to know about this year’s new federal student loan interest rates.

 

1) The 2015-2016 federal student loan interest rates don’t retroactively apply to debt you may have borrowed in previous years. So, if you borrowed your federal loans before July 1st, 2015, this new interest rate doesn’t apply to your present debt. (If you don’t know what your interest rate is, you can use this chart to figure it out.)

2) Your federal student loan interest rate applies to your loan during its entire “lifetime.” So, once that money is disbursed to you, your interest rate will stay constant throughout your repayment experience. It’s a fixed rate.

3) This federal student loan rate change does not apply to federal Perkins loans. These guys carry a 5 percent interest rate, and their own unique batch of repayment options.

4) Separate interest rates are established yearly for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. Each rate is actually the sum of a uniform “index rate,” + an “add-on” (which varies depending on the loan type, and whether the borrower is an undergraduate, a graduate or a professional student). To learn more about what an index rate is, and where it comes from, click here.

5) These new interest rates don’t apply to private student loans. While private loan rates may also fluctuate with the market, their rates* are determined differently, with factors like a borrower’s credit history, their ability to repay, and other information, when configuring their rate assignment.

*Note, private loan borrowers may have the chance to select a fixed-rate loan, which keeps interest consistent during repayment.

 

Student Loan Consultant Says

All things considered, the average borrower, with about $33,000 in debt, does not have much to consider here, unless they plan on continuing their schooling, and taking out more loans.

No matter where a borrower is in their repayment process (about to begin repayment, years into repayment or freshly borrowed and new to school) she or he would benefit tremendously from knowing what repayment options are available for their debt – and how to apply those options in a way that benefits their upcoming life plans and budget.

To learn more about creating a financial plan for your student debt repayment, please click here, to schedule a free help assessment with me.

Together, in 30 minutes or less, we’ll go over your loan portfolio, financial goals and best next steps. Even if you’ve been completely avoiding your loans and aren’t quite sure how to deal with them, reaching out to a seasoned professional (and steering clear of shady debt relief agencies!) will work in your favor — especially if you tackle this sooner, rather than later.

Best wishes,
Jan Miller
Student Loan Consultant