Take student loans this year? It will cost more.

Borrowing money for college is going to cost more this year.

Federal student loan interest rates jumped more than a full percentage point, the biggest jump in nearly a decade.

“You have rising interest rates. You have the cost of college going up. It’s definitely a challenge for any family,” said Vicki Beam, owner of Michigan College Planning in Traverse City.

The US Treasury Department announced earlier this year that undergraduate loans will have an interest rate of 4.99%, up from 3.73% last year and nearly double the 2.75% it two years ago. This means that a freshman who borrows the maximum $5,500 will pay an additional $399 in interest over 10 years.

Graduate loans also saw strong increases with unsubsidized loans now at 6.54% and PLUS loans, issued by the U.S. Department of Education to eligible parents and graduate or professional students, at 7.54% .

“One thing that a lot of families may or may not realize is … it’s the interest rate that will stay with that loan for the full term. So if you have students going four years, they’ll potentially have four different interest rates,” said Beam, who has been helping families across the country determine college funding for about 15 years.

Related: Will student loans be forgiven? A $10,000 plan could erase the debt of thousands of Michiganders.

Loans contracted from July 1, 2022 to June 30, 2023 will be impacted by the new rate.

Private student loan interest rates are tied to credit scores and can vary from approximately 1% to 14.75%.

The United States Treasury Department changes federal student loan interest rates each May based on 10-year auction notes. The US Congress linked this rate to interest on student loans in 2013.

The recent increases come after two years of low interest rates and are now at pre-pandemic levels. They will likely continue to rise as the Federal Reserve tries to rein in inflation by raising interest rates.

“People haven’t thought about it in a while because we haven’t had any interest on federal loans since March 2020 and it’s supposed to expire at the end of the month,” Beam said.

A pause on student loan repayments and interest is set to end on September 1.

President Joe Biden faces pressure to take broader action to tackle the $1.7 trillion student debt burden before the moratorium ends. The White House is considering a plan to forgive $10,000 per borrower as other Democratic lawmakers push for broader forgiveness programs.

Learn more about MLive:

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‘Cancel student debt once and for all,’ Michigan attorney general urges Biden

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