Federal Student Loan Interest Rates Cut 1 Percent for Two Years as Borrowers Switch Repayment Plans

The Department of Education announced Thursday that it will temporarily lower federal student loan interest rates by 1 percent for two years starting July 1. The change applies as borrowers enter a new repayment period and select plans after the end of the SAVE program. A survey of 1,005 U.S.

College graduates conducted by ConsumerVoice.org found that 83 percent said they could not have finished higher education without student loans. Nearly half reported delaying retirement savings because of loan payments, and nearly half said they had delayed building emergency savings. Thirty-seven percent said they had put off buying a home.

Fifty-six percent of those surveyed said they would borrow less if they could repeat the decision. The average college graduate carries a $39,633 student loan balance, according to LendingTree data cited in the report. The nation’s total student loan debt reached $1.66 trillion through the first three months of the year, the Federal Reserve Bank of New York reported.

Nicholas Kent, undersecretary of education, said the rate reduction will help borrowers as they consider new repayment plans and work to repay loans on time. The Trump administration has simplified federal repayment options, capped borrowing for graduate students, and adjusted interest rates.

In March the Supreme Court struck down the SAVE repayment plan, which had covered roughly 7.5 million borrowers.

Starting July 1, those borrowers will have 90 days to choose a new plan that features either fixed payments over time or payments adjusted to income.