Rates on New Student Loans Will Rise on July 1

Interest rates on new federal student loans will rise for the coming school year.While the increase is not big — 6.52 percent versus 6.39 percent this year — student borrowers are already grappling with steep college costs.At the same time, borrowers are navigating stubbornly higher prices at the grocery store and gas station and a major overhaul of the federal student loan repayment program, including new limits on how much can be borrowed.The new rates, which the Education Department announced this month, apply to loans made between July 1 this year and June 30 next year.

The rates remain fixed for the life of the loans and do not apply to loans taken out earlier.Students taking out the new, higher-rate loans are unlikely to benefit from a temporary interest rate reduction announced by the Education Department on Thursday.Starting July 1, the department said, it will offer a temporary rate reduction to borrowers who are repaying their student loans and sign up by Sept.30 to have their monthly payments automatically deducted from their bank account.

But the perk applies only to borrowers who are already in “active” repayment, the department’s press office said in an email.Students who take out loans July 1 or later for the coming academic year can’t benefit from the discount because they won’t yet be in repayment, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, an industry group.(One possible exception: Students who already earned their undergraduate degrees and had begun repaying their loans, but who are now in graduate school, may be allowed to waive the “in-school” deferment of their loans and continue making payments.

Because they would still be making payments, he said, they could benefit from the temporary discount.)Mr.Buchanan said that while Parent PLUS loans typically entered repayment relatively soon after they were issued, in most cases such loans borrowed on July 1 or later would not be able to meet ...