Lowest Student Loan Interest Rates in Decades for 2020-21 Academic Year
In this time of extreme uncertainty surrounding the COVID-19 pandemic, rarely do we seem to find good news. However, when it comes to student debt for those who are still in veterinary school (or any other graduate/professional program of study), interest rates for the 2020-21 veterinary school academic will be significantly lower than last year, and some of the lowest federal student loan interest rates we have seen in decades.
Federal student loan interest rates are updated each year using the high yield of the May U.S. 10-year treasury note. The high yield plus a factor for your Direct loan and school type sets the fixed rate you pay for the life of those loans received between this July 1st and next June 30th. As a veterinary student, the graduate/professional school Direct Unsubsidized loan interest rate will be 4.3%, down 29% from last year. The Direct Graduate Plus loan rate will be 5.3%, down 25% from last year.
The importance of your school Cost of Attendance
Do not borrow more than you need to simply because student loan interest rates are lower than last year. The less you borrow, the less interest accrues and the less you’ll have to manage in repayment. Always review your school’s published cost of attendance (COA) and look for ways to reduce your financial aid awards.
As a graduate/professional student, you’re frequently offered student loans to cover the full COA. Use your budget to determine if you actually need to take all that you are offered. The COA is the maximum amount you can borrow. Your mission, if you choose to accept it, will be to accept less than the maximum COA.
Returning loans vs. paying interest during school
Too many veterinary students are paying interest on their student loans while they are in school. If you are paying interest on your student loans as a student, ask yourself where that money comes from to pay that interest. Even if the funds you borrow next semester are cheaper than you borrowed this past semester, you’re losing ground. A better, less expensive plan would be to reduce your future financial aid award or return loans that you received in excess of your budgeted need rather than accumulate and pay the interest on extra borrowed amounts. You have up to 120 days to return the amounts you received that you might not need. When you return student loans, the principal, interest, and fees are also returned. Therefore, the loans you don’t borrow or the principal you return within the 120-day window goes much farther than paying the interest alone. To learn more, visit the VIN Foundation Borrow Better resource page.
If you are starting veterinary school this fall or returning next fall (hopefully in person, but we’ll see), use the VIN Foundation My Student Loans tool and In-School Loan Estimator. These free tools help you account for loans you already have and estimate your remaining borrowing costs to finish veterinary school. You can even use the In-School Estimator to calculate how much you might save by returning unused student loans or reducing your future financial aid awards.
Upload your student aid data file to the My Student Loans tool or start a fresh estimate with the VIN Foundation In-School Loan Estimator
Less expensive options
Look for ways to borrow less expensive loans. Health Professions Student Loans (HPSL) and Loans for Disadvantaged Students (LDS) are potential alternatives to Direct loans for veterinary school if they are available for your education program and if you are eligible to receive them. HPSL and LDS have an interest rate of 5% and they do not accumulate interest during school. They do, however, require you to provide your parents’ financial information in order to determine your eligibility. Check with your school financial aid office for more details on availability and the application process.
We’re here to help!
Happy budgeting this spring, summer, and fall. An ounce of planning is worth a pound of interest saved in repayment. Please feel free to reach out with any questions: studentdebt@vinfoundation.org. VIN Foundation is here to help with understanding your veterinary school borrowing and repayment options now or in the future!
Dr. Tony Bartels graduated in 2012 from the Colorado State University combined MBA/DVM program and is an employee of the Veterinary Information Network (VIN) and a VIN Foundation Board member. He and his wife have more than $400,000 in veterinary-school debt that they manage using federal income-driven repayment plans. By necessity (and now obsession), his professional activities include researching and speaking on veterinary-student debt, providing guidance to colleagues on loan-repayment strategies and contributing to VIN Foundation initiatives.
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