Student loan interest rates in the U.S. are decreasing for the upcoming academic year, which starts after June 30.
The rate on direct loans to undergraduates previously sat at 4.29 percent; this rate will now be reduced to 3.76 percent.
For graduate students, the interest rate— which, it should be noted, stays fixed at the initial rate implemented— will be reduced to 5.31 percent. The previous rate was 5.84 percent.
Plus loans, largely used by parents of undergraduates, will also see a rate decrease from 6.84 percent to 6.31 percent.
This news provides relief to American student borrowers, who have accumulated over $1 trillion in debt nationally. Graduates in the Class of 2014 had average loan obligations totalling $29,000.
Although lowering rates will certainly help those with student loans, the financial sector has also come to fill the gap. Fidelity Investments, in particular, saw an opportunity in that a third of those enrolled in its workplace retirement plans have unpaid loans, and a majority of these individuals claim that their debt has impacted their saving for retirement.
Their solution? A free tool that lets borrowers view and manage their loans from a single portal, while showing the impact of different payment plans. Many users of its pilot program have praised the tool.
As for calculation, fixed student loan rates are created annually, and are based on a formula that takes into account the 10-year Treasury note rate, along with an extra fixed rate.
Additional fees and reductions in the amount owed are applicable to many loans.