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College will cost more for students borrowing during the 2023-24 academic year as federal student loan interest rates climb to heights not seen in a decade or longer.

As of July 1, undergraduates who take out new direct federal student loans will see interest rates rise to 5.50%, the Education Department’s Federal Student Aid office said Tuesday — up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.

Interest rates on graduate direct loans, available to graduate and professional students, will rise to 7.05% from 6.54% the year prior. PLUS loans, which parents and grad students can use to fill in education funding gaps, will jump to 8.05% from 7.54%. Here are the higher 2023-24 rates for each type of federal student loan, compared with the 2022-23 academic year:

Undergraduate direct student loan interest rates haven’t been this high since 2013. Interest rates on direct graduate loans and PLUS loans, introduced with fixed rates in 2006, have never been this high.

Higher interest rates mean paying off loans will cost more. Each year, usually in mid- to late May, the government sets fresh federal student loan interest rates for the academic year ahead by adding the U.S. Treasury’s May 10-year note auction yield with an additional “add-on” percentage, which varies depending on loan type. The final rates apply to new loans doled out starting July 1.

Ultimately, charging more interest will make college more expensive for the millions of college students and their families who take out loans. Today, nearly 44 million people collectively owe roughly $1.6 trillion in outstanding federal student loans — and federal loans account for about 93% of the total student debt burden, according to a NerdWallet analysis of Department of Education and Federal Reserve data.

For example, if you start college this fall and borrow a total of $31,000 in unsubsidized federal direct loans (the maximum loan amount for dependent undergraduates) with a 5.50% interest rate, you’ll wind up paying back almost $50,000 under a standard 10-year repayment plan. If you’d started college in 2020-21 and taken out the same $31,000 federal loan with a record-low 2.75% interest rate, you would’ve had to repay around $39,500 including interest over 10 years.

The higher rates will apply to all students who take out new federal loans for college or graduate school in the 2023-24 academic year. It’s important to note that all federal student loans have fixed interest rates, so they won’t change during the repayment period.

In recent years, federal student loans have offered lower interest rates (and fees) than private alternatives, but that may no longer be true for some borrowers. The average private fixed-rate undergrad student loan charges 5.99% to 13.78% in interest, according to a January 2023 NerdWallet analysis. As a result, private loans may start to look more attractive.

However, private student loans have drawbacks. They usually require a student to have a high credit score — or a co-signer with a high credit score — to qualify for the lowest rates. The co-signer, typically a parent, is equally responsible for the loan. Federal student loans don’t allow co-signers, and only federal PLUS loans require a credit check.

Federal loans also offer benefits like payment plans that cap monthly bills at a certain percentage of your income, temporary payment pauses if you lose your job or experience financial hardship, and loan forgiveness programs. Private loans don’t typically offer these protections.

Though federal interest rates still have room to climb, they could soon hit a ceiling. Under the Higher Education Act, rates may not exceed 8.25% for undergrad loans, 9.5% for grad loans and 10.5% for PLUS loans. Private student loan lenders have much higher maximum interest rates.

Minimize your total college debt — and the amount of interest you’ll pay over time — by maximizing funding sources you won’t have to repay, like scholarships, grants, work-study and other financial aid options.

You’ll need to submit the Free Application for Federal Student Aid, or FAFSA, to qualify for most federal, state and school grants. That includes the federal need-based Pell Grant, which, starting in 2023-24, can give students up to $7,395 per year in free money to pay for college. Scholarships also often require applicants to submit the FAFSA, including some offered by private organizations.