Student loan interest rates are about to go up Student loan interest rates reset every May. This year, they're on the rise.

Beware, new student loan borrowers: Interest rates are about to jump

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STEVE INSKEEP, HOST:

There's a lot of talk about when or whether President Biden will broadly cancel student debt, so it's easy to forget something that is much more immediate. The federal student loan system itself remains largely unchanged today, and one part is about to shock a lot of borrowers. NPR's Cory Turner reports.

CORY TURNER, BYLINE: The shock is that the interest rates on new federal student loans are about to go up, and not just a little.

ROBERT KELCHEN: Interest rates are going to go up quite a bit because Treasury yields and inflation have gone up quite a bit.

TURNER: Robert Kelchen is an expert on higher education finance at the University of Tennessee, Knoxville. He says students who took out new undergraduate loans for this school year got a really good rate - 3.7%. The problem is for borrowers who will need a new loan for next school year because interest rates for new loans reset every summer, based on the Treasury Department's auction for 10-year notes, which is set for later today. And as with mortgage rates and virtually everything else these days, student loan interest rates are rising. For example, that current 3.7% for undergrads - it's likely to jump to 5% or higher. On a loan of $5,500 - the max for a first-year dependent undergrad - that's more than $400 in extra interest over 10 years. Still, Jason Delisle, a senior policy fellow at the Urban Institute, says borrowers will be hard-pressed to find a better deal anywhere else.

JASON DELISLE: If you wanted to get a long-term fixed-rate private student loan with no credit checks, no collateral and no co-signers, you're going to be looking at a lot more than 5%.

TURNER: Delisle says the interest hike could have an even bigger impact on graduate students and parents because they're allowed to borrow a lot more than undergrads but at much higher rates. The average yearly parent PLUS loan, for example, is around $14,000. So a parent borrower with a loan that size over 10 years could soon end up paying an extra $1,100 or more in interest. And one more thing. Because these new loans at this higher rate won't be issued for a few more months, if President Biden does broadly cancel some student debt, it likely won't help these borrowers.

Cory Turner, NPR News.

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