College students will get a bit of a break for the coming academic year. Interest rates on new federal student loans they take out are dropping.
As of July 1, the rate on direct loans for undergraduates will be 3.76 percent. That will apply whether the loans are based on financial need — “subsidized,” in federal loan lingo — or not.
That rate is down from 4.29 percent for loans that were taken out during the borrowing year that concludes next Thursday. (Rates are set annually for new loans, but the rates remain fixed for the life of the loan.)
The rate on direct loans made to graduate students will be 5.31 percent, down from 5.84 percent. The rate for Plus loans, made to the parents of undergraduates or to graduate students, is 6.31 percent, down from 6.84 percent.
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For borrowers, any bit of good news, even if temporary, is welcome. The burden of student debt has ballooned to more than $1 trillion nationally. College graduates in 2014 had an average of $29,000 in student loans, according to the Project on Student Debt, an arm of the Institute for College Access & Success.
Fidelity Investments said a survey of participants in its workplace retirement plans found that one in three carried student debt. Of those, 80 percent said student loans affected their ability to save for retirement.