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Student Loan Interest Rates Are Going up Again

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Interest rates on federal student loans will go up for the second year in a row, with borrowers for the 2018-19 school year paying 0.6 percentage points more than last year to take out loans from the Education Department.

  • Direct subsidized loans for undergraduate borrowers: 5.05%
  • Direct unsubsidized loans for undergraduate borrowers: 5.05%
  • Direct unsubsidized loans for graduate or professional student borrowers: 6.60%
  • Direct PLUS loans for parent, graduate and professional student borrowers: 7.60%

Why loan rates are going up

Federal student loan interest rates reset every year. Per legislation signed into law in 2013, the rates are based on the high yield of the 10-year treasury note during the last auction held before June 1. The rates remain in effect for all loans disbursed in a 12-month period between July and June of the following year. On May 9, the 10-year note had a high yield of 2.995%.

Once the auction occurs, the rates are calculated by adding several percentage points to the 10-year treasury note yield, to cover the “administrative costs” of issuing the loans, according to the 2013 legislation that enacted this system. For undergraduate loans, the rate is calculated by adding 2.05 percentage points. For direct unsubsidized graduate loans, add 3.6 percentage points, and for PLUS loans, add 4.6 percentage points.

Interest rates, in general, have been on the rise over the last few years, so the bump in cost of borrowing isn’t a surprise. The good news is that Congress set a cap on student loan interest rates when it came up with the new formula. The bad news is those caps are pretty high, so student loan interest rates are likely to continue rising, as long as we remain in this rising-rate environment.

Interest rates cannot exceed 8.25% for undergraduate borrowers, 9.5% for graduate borrowers with direct unsubsidized loans and 10.5% for PLUS loan borrowers. Even though rates increased significantly this year, they have much more room to grow, which we may see if rates continue along the path they’ve been on recently.

What this rate change means

For the most part, borrowers with existing federal student loans will not see their rates change, as all federal student loans disbursed after July 1, 2006 carry fixed interest rates.

Students and parent borrowers taking out federal education loans between July 1, 2018 and June 30, 2019 will pay the new interest rates listed above. The rates will remain in effect for the life of the loan.

How to lower your student loan interest rates

Student loan borrowers have few options for lowering their interest rates. You could either combine all or most of your federal student loans with a direct consolidation loan once you leave school, but that may or may not save you money (more on that in a minute). You could also refinance your student loans with a private lender, but in exchange for potentially lower interest rates, you give up the benefits exclusive to federal student loans, like income-driven repayment plans and student loan forgiveness. Private lenders may or may not offer loan deferment or forbearance (as federal loans do), which allow you to suspend payments if you go back to school, fulfill military service orders or experience financial hardship, among other qualifying circumstances.

You can preserve those benefits with a direct consolidation loan. Your interest rate on that loan will be the weighted average of the interest rates on the combined loans, rounded up to the nearest one-eighth of one percent. The weighted average is what makes this a tricky decision: If your loans with the highest unpaid balance have the lowest interest rate, you may end up with a lower interest rate when everything’s combined. But if your largest balances have the highest rates, you could actually receive a higher interest rate.

If you’re comfortable refinancing with a private lender, keep in mind you’ll need good credit to qualify for the best rates. You can check out our list of the best student loan refinance offers to get a sense of your potential savings.

How to reduce the amount of interest you pay on student loans

Refinancing and consolidating aren’t the only ways you can reduce how much you fork over to the Education Department. Consider committing to one or both of these strategies:

Pay the interest as you go

Unless you have a direct subsidized undergraduate loan, you will be responsible for paying the interest your loan accrues while you are enrolled in school at least half-time, in your grace period (the time between leaving school and entering repayment) or in deferment. When you enter repayment, that interest will be added to your principal loan balance, meaning you will end up paying interest on that interest. By paying the interest as you accrue it, you can avoid this situation, called interest capitalization.

Of course, many students may not have the means to make such payments while in school, but if you can, you may save yourself a lot of money in the long run. This generally only applies to borrowers of direct unsubsidized loans and graduate PLUS loans, as the Education Department pays the interest on subsidized student loans while the borrower is in school, grace period or deferment, and parent PLUS borrowers generally enter repayment once the loan is disbursed.

Pay more than the minimum

Once you enter repayment, your loan servicer will send you a statement saying how much you owe each month. You can pay more than that, and by making extra payments toward your principal balance, you can reduce the amount of interest you pay over the life of the loan. This is a nice alternative to refinancing your student loans to a shorter term, if you’re worried about taking on a higher, required monthly payment.

Make sure you tell your loan servicer that you’re making an additional payment and you’d like it to apply to your principal balance. Otherwise, the servicer may hold onto the money as a future payment. While that means you may not have to pay the next month, you’re also not saving anything by sending over your money early. It’s a good idea to check our account after making such a payment, to ensure the servicer processed it properly.

This story was updated on July 2, 2018, after the Department of Education updated rates on its student aid website. It was originally published May 9, 2018.

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Christine DiGangi
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Christine DiGangi is a writer at MagnifyMoney. You can email Christine at [email protected]

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How to Save on Summer Superfoods

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Summer is right around the corner, and there’s no shortage of delicious, nutrient-packed superfoods to indulge in. There’s just one catch: We tend to associate clean eating with high price tags.

While this is indeed the case for some foods (fresh raspberries go for about $2.29 per cup), eating healthy doesn’t always have to break the bank. It’s more than possible to weave nutritious, wholesome foods into your diet without destroying your budget.

Here’s an insider look at some of summer’s best and brightest superfoods — and how to save money stocking up on them.

Avocados

Avocados top the list, boasting a ton of health benefits.

“The reason they’re so healthy is that you’re getting a good combination of mono and saturated fatty acids, which are the ones that are good for the heart,” said dietitian Jessica Cording, M.S., R.D., C.D.N. “They’re also a very good source of fiber. In about a half of a medium-sized avocado, you’re going to get about 4 grams of fiber.”

That goes far, since the Academy of Nutrition and Dietetics recommends getting 25 to 38 grams of fiber per day. Another kicker: Avocados are a great source of vitamin E, which has been linked to improved cognitive functioning. To cut costs, Cording suggested keeping an eye out for store sales, then storing your avocados in the refrigerator to preserve their freshness.

Berries

Berries are a standout superfood. Blackberries, raspberries and blueberries are especially healthy, thanks to their strong antioxidant properties. Antioxidants help tame dangerous free radicals that can wreak havoc on our cells and potentially leave cancer in their wake.

Cording adds that blueberries have also been shown to promote heart health and cognitive functioning: “A lot of the pigments that give berries those beautiful colors are due to the anthocyanins that are also doing a lot of that awesome work taking care of us and fighting cell damage.”

Just be mindful when purchasing strawberries: while super healthy, they also top the Environmental Working Group’s “dirty dozen” list, meaning they have a higher risk of pesticide contamination. Going organic is your best defense, but it can get pricey. You may be able to curb your costs by opting for frozen berries over the fresh stuff, which also reduces food spoilage.

“For the most part, when you freeze fruits you’re not going to use, it actually preserves the nutrients as they are,” said registered dietitian and nutritionist Emily Dunn, M.S., R.D.L.D. “Freezing is almost like taking a snapshot of the nutrients as they are the day that they’re frozen. They do degrade a tiny bit over time, but nowhere near as fast as fresh.”

Use sales on frozen berries as an opportunity to stock up your freezer. Dunn added that your local big box store, like Sam’s Club or Costco, may also be cheaper than the regular supermarket.

Nuts

Different nuts tout different health benefits, but the bottom line is that nuts are indeed a superfood.

“Brazil nuts have a lot of selenium, which is good for your thyroid,” Dunn said. “Walnuts have some omega-3s in them, which are really good for brain and heart health, and almonds have a lot of vitamin E and some fiber in them, and fiber is good for digestion.”

So which ones should you buy? Dunn said to find ones you like, then go wherever your wallet takes you. Peanuts, for example, may be way more affordable than Brazil nuts, depending on where you live. You can also think about your own individual health needs — for example, if you’re trying to up your antioxidant intake, almonds might be a great choice since vitamin E is an antioxidant.

Bulk shopping is another option. Buying an 10-ounce bag of Mauna Loa dry roasted macadamia nuts will cost you $19.99, plus shipping, if you purchase it through the manufacturer. Meanwhile, BJ’s Wholesale Club is currently selling 10-ounce bags for just $10.99.

Chia seeds

Chia seeds are an often overlooked superfood that pack a big health punch.

“They’re a really good source of the plant form of omega-3 fatty acids,” Cording said. “The main reason I recommend chia seeds, honestly, is that they’re a really good source of fiber. In a tablespoon, you’re going to get 4 grams of fiber.”

Chia seeds are also extremely versatile. Toss them into a smoothie or sprinkle them on your yogurt for an automatic fiber boost. In terms of affordability, Cording says they’re pretty inexpensive at most markets — you can snag a 2-pound bag at Walmart for under $9.

Fatty fish

Fatty fish is brimming with the good stuff — protein, omega-3s and vitamins galore. It’s little wonder the American Heart Association recommends getting at least two servings per week. The downside is that larger, predatory fish, like swordfish and king mackerel, have higher mercury levels; not so for smaller fish.

“I know they’re not everyone’s cup of tea, but I’m a really big fan of sardines,” Cording said. “My favorite way to enjoy them is to take the boneless, skinless ones packed in olive oil, and mash those up and throw them in a salad with some leafy greens, some other veggies and some balsamic vinegar.”

The main reason she recommends sardines, though, is that they’re very budget-friendly, making it a great way to incorporate some seafood into your diet at a more accessible price point than, say, wild salmon.

Extra virgin olive oil

“There are a lot of popular oils out there, from avocado oil to coconut oil to grapeseed oil; and honestly, in my experience, olive oil trumps them all,” said Dunn, adding that it has the most antioxidants of any oil.

What’s more, one 2011 study published by the American Academy of Neurology found that those who regularly used olive oil for cooking and as a dressing had a 41 percent lower stroke risk than those who had no olive oil in their diet.

You can likely save by buying in bulk, but Dunn warned that olive oil usually goes bad after six months. (Translation: only buy what you’ll reasonably consume within that time frame.) Your local big box store isn’t your only option, though. At the time of this writing, organic extra virgin olive oil was cheaper at Walmart than at Costco.

The bottom line

Eating well this summer doesn’t have to be costly. Buying in bulk, looking for sales and opting for frozen fruits and veggies can go a long way. Dunn also suggested being mindful of the cheapest option within a specific category. Take dark, leafy greens, for example.

“Kale is typically more expensive than spinach, but the nutrient profile is pretty similar,” she said.

Meal planning can also help stretch your budget and prevent food waste, which is no small thing when you’re investing in clean eating.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Marianne Hayes
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Marianne Hayes is a writer at MagnifyMoney. You can email Marianne here

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Federal Student Loan Rates to Ease Back Down for 2019-2020

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

After back-to-back increases in the previous two summers, interest rates for federal student loans are headed lower for the coming year.

Congress sets federal student loan rates each spring, based on the yield of the benchmark 10-year Treasury note, and the new interest rates go into effect on loans disbursed from July 1 onward.

While the Department of Education had yet to post the new rates on its site, news reports put the decreases for July 2019 to June 2020 as:

  • Undergraduate Direct Subsidized and Unsubsidized Loans: 4.53% (down from 5.05%)
  • Graduate Direct Unsubsidized Loans: 6.08% (down from 6.6%)
  • Graduate PLUS and Parent PLUS Loans: 7.08% (down from 7.6%)

Federal loan interest rates last declined in July 2016, with the undergraduate direct loans falling by about half a percentage point to 3.76%, for example.

Federal student loans also come with loan origination fees, but those generally change in October. For the 2018-19 period they were:

  • Undergraduate Direct Subsidized and Unsubsidized Loans: 1.062%
  • Graduate Direct Unsubsidized Loans: 1.062%
  • Graduate PLUS and Parent PLUS Loans: 4.248%

For more on the true costs of federal student loans, check out our complete guide, including all the various types of loans and strategies for repayment.

This report originally appeared on Student Loan Hero, which like MagnifyMoney, is part of LendingTree.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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