Federal student loan interest rates will substantially increase for the 2024-2025 academic year. The rate increase will make it more costly to borrow money for school. This increase will affect students and parents issued a federal student loan on or after July 1, 2024. The class of 2024 seniors and parents will be impacted. Current college students needing to accept federal student loans for the upcoming year could also take on the new rate.
High school juniors and underclassmen should note the news, as federal student loan interest rates change yearly. Be aware that you, too, could see higher or lower federal interest rates.
The announcement, however, highlights the importance of scholarships. Scholarships are the golden way to pay for school. They should be first and foremost on any student's financial plan—for college, community college, or trade or vocational school.
Scholarships Have No Interest Rates
Scholarships and grants are the best way to pay for college because students do not have to pay them back. No interest rate is tied to scholarships or grants, so the money students earn from scholarships helps pay for school without interest rate accruals.
What will be the interest rate on federal student loans?
While the federal student loan interest rate is locked in according to the year obtained, the loan will still accrue at the established origin rate. The longer it takes to finish school and/or repay your student loan, the more it will cost you.
CNBC reports the 2024-2025 federal interest loan rates:
• Federal Direct Subsidized Loans and Direct Unsubsidized Loans (Undergraduate) 6.53%
• Direct Unsubsidized Student Loans (Graduate or Professional) 8.08%
• Federal Direct PLUS Loans 9.08%
The latest federal student loan rates will not affect current student loans or private student loans.
Do scholarships reduce student loans?
Scholarships minimize the student loans you may need to take out to pay for school. Students evaluating their student aid packages are encouraged to accept scholarships and federal grants first, as these do not need to be paid back!
If referring to a reduction in the amount of financial aid offered by colleges, scholarships generally won't affect the amount of financial aid colleges provide.
How is a student loan different from a scholarship?
A student loan, private or federal, must be paid back. Scholarships are not a loan. For comparison purposes, scholarships serve as a monetary gift. Student loans consist of borrowed money to cover the cost of school with the expectation the lender will pay back the original loan total, including the additional accrued interest.
Are FAFSA loans interest-free?
There are no FAFSA loans. However, students may qualify for
Federal Direct Loans upon completing their FAFSA. Federal Direct Loans, sometimes called federal student loans, are not interest-free.
Completing the FAFSA allows students and their families to know what type of federal aid they're eligible for. Students and parents cannot access federal student loans unless they complete and submit their FAFSA.
Often packaged as an umbrella term, federal financial aid includes several financial resources. These include:
Federal Grants
This aid can come from federal grants, such as the
Pell Grant or
TEACH Grant . Federal grant money received does not need to be paid back.
Types of Federal Student Loans
All federal student loan programs have fixed interest rates. "The government sets interest rates on its education loans once a year," according to
CNBC.
• Federal Subsidized Loans: These loans are for students with financial need.
• Federal Unsubsidized Loans: Unsubsidized loan interest accrues while a student is in school, during the Grace Period, and in deferment.
• Federal PLUS Loans: These loans are for graduate and/or professional students and parents. Interest builds while the student is enrolled in school, during deferment, and during the Grace Period.
More Ways to Pay for School
Scholarships reign supreme. However, there are
more ways to pay for school that will not lead to student loan debt.
Military Commitment or Military Enlistment
All United States Armed Services branches offer lucrative financial assistance for higher education. There are several paths to consider when using U.S. military education benefits. These paths include:
• Attend college as an ROTC Cadet: While in college, you'll also train for your military career with weekly physical training and occasional field training or special exercises. ROTC students must also enroll in military leadership courses. After graduation, ROTC students become commissioned officers.
According to
Military.com, "The U.S. Army, Navy, Air Force, and Space Force all have ROTC programs." ROTC scholarships vary by branch; however, they typically cover a large part of the cost of college. Students must commit to serving for a specified time as a military officer to obtain a full ROTC scholarship.
• Take College Courses as an Enlisted Service Member: You can join the military and take college courses on base or online.
Looking for more military-related information? Contact a recruiter to learn more about the educational benefits offered by the military or visit
Military.com.
• Work on Your Degree as a Reservist or National Guard Member: If you're not ready for a full military commitment, consider working on your college degree while receiving on-the-job training in the National Guard.
• Apply as a Student at a Military Academy: Students interested in this route must plan ahead. While tuition is covered at 100%, the admissions process is competitive at each of the five military academies. According to
The White House, service academy nominations require students to have:
Exceptional leadership qualities
College-prep focused course load in high school
Physical and mental fitness
Required minimum SAT and ACT scores
Part-Time Employment
Students have several options when working a job to help pay for school.
Federal Work-Study
Federal work-study is a financial aid opportunity for some students. A work-study job is often on campus or near the college a student is attending. Most money earned is intended to help students pay for their degrees. Students must complete their FAFSA to qualify for the Federal Work-Study program.
Jobs with Tuition Benefits
Many popular retail businesses now offer tuition benefits for their student employees. This includes
full-tuition reimbursement programs at companies like Walmart and Target or tuition assistance to help cover student-related costs. Additionally, many retail and
fast-food businesses offer scholarships for their employees.
Public-Service Work Commitment
Another option to pay for school is to plan to work in public service for 10 or more years after college graduation. The
Public Service Loan Forgiveness program was designed to reward people who choose to work in public service. These jobs include most fields and can be found at the municipal, state,
Department of Defense, or federal levels.
As students and families discuss how they'll pay for school, reviewing all possible paths and financial resources is essential. In some cases, getting a federal student loan or private student loan may be necessary to help cover college costs. To borrow smart, students and families should
understand each financial commitment's pros and cons, requirements, and expectations .
Applying for scholarships and completing the FAFSA are vital elements in all educational finance plans. Set a personal scholarship application goal each year or semester and stick to it. Apply for scholarships throughout high school, college, or trade school. Save time by creating your
free Fastweb profile to get scholarship matches that fit you!
