July is here, which brings an important development to student borrowers: Higher interest rates for education loans kick in today. Loans for undergraduates will increase to 4.66 percent, from 3.86 percent, for all new borrowing during the 2014-15 school year. (Loans that students already took out aren’t affected by the hike.)
Historically, Congress set a fixed rate for students loans. It was lowered to 3.4 percent during the financial crisis. Last summer, that temporary reduction was set to expire, which would have caused the rates to double to 6.8 percent. A last-minute deal pegged the rates to the government’s borrowing costs, which are at historic lows.