STUDENT LOAN INTEREST RATES INCREASE FOR 2022-23 ACADEMIC YEAR
Each spring, we closely monitor the U.S. 10-year Treasury yield to see the final number setting the federal student loan interest rates for the upcoming academic year. For the 2022-23 veterinary school academic, the answer is a continued trend of increasing student loan interest rates.
Federal student loan interest rates are updated each year using the high yield of the U.S. 10-year Treasury note auction before June 30th. The high yield plus a factor for your Direct loan 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 6.54%, up from 5.28% last year. The Direct Graduate Plus loan rate will be 7.54%, up from 6.28% last year.
This year, we’re also adding the Direct Loan interest rate history and current rates for undergraduate Direct Loans. With the continued pandemic forbearance benefits, it can be challenging to know what your interest rates are so you are prepared once repayment begins.
The pandemic forbearance period that started on March 13, 2020, set interest rates to 0% for all eligible federal student loans. This special forbearance will continue through at least August 31, 2022. Therefore, all your eligible federal student loans, even those loans you receive for the start of the 2022-23 academic year, will be interest-free for a bit longer. The impact of the pandemic forbearance on veterinary student loans has been quite beneficial, significantly lowering the interest that you normally accrue during veterinary school. Often, the in-school interest savings have been in the tens of thousands of dollars for recent veterinary graduates.
The importance of your school’s Cost of Attendance
Do not borrow more than you need just because student loan interest rates are zero for a little while longer. The less you borrow, the less interest accrues (long-term), and the less you’ll have to manage in repayment. It’s ALWAYS easier to manage less than more when it comes to student loans. Review your school’s published cost of attendance (COA) and look for ways to reduce the loans you accept in your financial aid awards.
As a graduate/professional student, you’re frequently offered student loans to cover the full COA. Use your personal budget to determine if you actually need to accept all the loans you are offered. The COA sets the maximum amount you can borrow. Your mission, if you choose to accept it, will be to accept only the amount you need to satisfy your budget, and ideally, less than the maximum COA.
Reducing loan awards and 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 payment money comes from. If you’re using federal Direct student loans to pay down other federal Direct student loans, you’re not gaining any ground. Even if the funds you’re using are coming from your veterinary school job or from the help of a significant other, a less expensive plan would be to borrow less rather than paying interest during school. Reduce your future loan awards or return loans that you received above your budgeted need to make the biggest impact on your total debt balance. You have up to 120 days to return the loan 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 will go much farther than paying the interest. To learn more, visit the VIN Foundation Borrow Better resource page.
If you are starting veterinary school this fall or returning next fall, use the VIN Foundation My Student Loans tool and In-School Loan Estimator to help you review your current student loans and project your graduation balance.
Here is a video tutorial on how to locate and download your student aid data file. These free tools help you account for loans you already have and help you estimate your total debt balance at graduation. 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.
Less expensive options
Look for ways to borrow less expensive loans. Health Professions Student Loans (HPSL) and Loans for Disadvantaged Students (LDS) are potential federal 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 (subsidized loans). 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: firstname.lastname@example.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.