Federal Student Loans for 2020-21 at Historically Low Interest Rates

ScholarNet Blog Articles | June 2, 2020

Federal student loans issued for 2020-21 will be at historically low interest rates. Here’s what this bit of good news means for borrowers.


While many students and families face challenges in planning for and affording college for fall, they received good news from a recent electronic announcement by the U.S. Department of Education setting the rates for new federal student loans to be disbursed between July 1, 2020 and June 30, 2021. The rates, which are based off the U.S. Treasury Department’s auction of 10-year notes, mean that borrowers will benefit from changes in the government’s cost of borrowing during this time.

The rates for undergraduate Stafford loans will be 2.75%, down from 4.5% in the current academic year, according to a recent CNBC article. As calculated by Mark Kantrowitz, publisher of SavingForCollege.com, this equates to about $1,000 in interest saved over the life of the loan for a student with a $10,000 loan. The last time interest rates approached this level was 15 years ago, when they fell to 2.875%.

Besides the undergraduate Stafford loan rate already mentioned, the Department of Education announcement also included loan rates for new graduate Stafford loans (4.30%) and new Grad PLUS and Parent PLUS loans (5.30%).

In preparing students and families for upcoming semesters, you’ve been urging students to complete the (FAFSA) in order to qualify for these loans, as well as scholarships and grants, before looking for private student loans to supplement the cost of education. While private student loan rates are also very low now due to current market conditions, students should always seek free money and federal student loans before supplementing with private student loans, due to the flexibility offered by federal student loan repayment plans and benefits offered.

You’ll want to advise students and families that all federal student loans disbursed between July 1, 2020 and Sept. 30, 2020, will benefit from the interest rate waiver in place under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which waives interest on federally held loans from March 13, 2020 through Sept. 30, 2020. Beginning on Oct. 1, 2020, the interest rate will be restored to these new loans and interest will accrue on unsubsidized loans for the remainder of the in-school period.

You can count on us to be here with student loan information for you and the students and families you serve.

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