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New government data shows inflation may be showing signs of easing. That may be good news for retirees and people approaching retirement.
The Social Security cost-of-living adjustment, or COLA, may be 3.2% in 2025 based on the latest government inflation data, according to one estimate.
Two risk factors determine how much those groups are affected by high inflation, new research finds.

Lourdes Balduque | Moment | Getty Images

High inflation eased slightly in April, which may provide some relief to consumers who have been contending with elevated prices.  
For retirees and people approaching retirement, higher than normal inflation poses unique challenges.

Most retirees have access to one of the few inflation-adjusted sources of income — Social Security — that is adjusted every year to keep pace rising costs.
This year, Social Security beneficiaries saw a 3.2% increase to their benefits.
The Social Security cost-of-living adjustment may also be 3.2% in 2025 based on the latest government inflation data, estimates Mary Johnson, an independent Social Security and Medicare policy analyst.
That estimate may change between now and October, when the Social Security Administration announces next year’s cost-of-living adjustment, or COLA. The average Social Security COLA has been 2.6% over the past 20 years, according to The Senior Citizens League.

While Social Security benefits are keeping pace with price increases, the effects may vary for individuals depending on their personal expenses and where they live, noted Laura Quinby, senior research economist at the Center for Retirement Research at Boston College.

“It’s getting ninety percent of the way there for most households every year, which is just incredibly valuable,” Quinby said.
Yet even with inflation-adjusted benefits, retirees have struggled with higher prices since inflation rose in 2021. And near-retirees have also faced challenges planning for a new life phase amid a rising cost of living.
That can both reduce their current spending and diminish their accumulation of wealth for the future.
New research from the Center for Retirement Research looks at exactly how inflation has impacted people who fall in those groups — near-retirees under age 62 and retirees ages 62 and up.
Two factors determine how well they can manage inflation’s shocks — whether their income and investments can keep pace with rising prices, and the amount of fixed-rate debt they have, the research found.

How inflation affects household wealth

Inflation impacts an investor’s portfolio assets.
While bonds and fixed-income assets may see price increases, equities may do well, so long as the economy avoids a recession, according to the CRR research.
Households with more wealth tend to fare better amid high inflation, because they’re more likely to be invested in stocks and businesses that continue to grow in value.
Retirees tend to have most of their income from either Social Security or defined benefit pensions. While Social Security is adjusted for inflation, pensions generally are not — a disadvantage for retirees who rely on them.
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Near-retirees are more likely to rely on earnings from work. If their salaries do not keep up with inflation, they are more likely to be affected by higher costs.
More affluent near-retirees may have other sources of income from investments or businesses that grow with inflation. Others may already be collecting pension income.
Households with fixed-rate mortgage debt are at an advantage, since their monthly payments stay the same even as inflation rises. Near-retirees tend to benefit from that, since they are more likely still have mortgages compared to retirees.

How older households react to inflation

When inflation prompts higher costs, it can have a negative impact on both immediate consumption and how much goods and services a household can buy, as well as future consumption, Quinby noted.
Many households tend to cut back on savings and increase withdrawals to try to lift themselves to where they were before inflation picked up.
“But it comes at a cost, which is that they take they take a big hit to their future wealth by doing that,” Quinby said.

Near-retirees who are still working have more flexibility to adjust to higher inflation compared to retirees, since they’re likely to see wage gains.
Pre-retirees who stay in the work force may be able to make up for lost savings if they’re able to catch a time when wages overshoot inflation, Quinby said.
However, just 4% of near-retirees surveyed for the research changed their retirement age in response to inflation, with a four-year average expected delay. Among all near retirees, 34% adjusted their retirement date.
Retirees have less flexibility to address the effects of high inflation. But where they can, they can take advantage of higher interest rates by reinvesting fixed-income investments that may be earning less, the research suggests. More

The consumer price index rose 3.4% in April from a year earlier, a decrease from 3.5% in March, according to the Bureau of Labor Statistics.
Gasoline and housing prices put upward pressure on inflation, while prices for categories like groceries and new and used cars fell in April.
Consumer buying power rose over the past year as inflation moderated.

Grace Cary | Moment | Getty Images

Inflation fell slightly in April as easing price pressures for groceries and other areas of consumer balance sheets were partially offset by higher gasoline prices and stubbornly high housing costs.
The consumer price index, a key inflation gauge, rose 3.4% in April from a year ago, the U.S. Labor Department reported Wednesday. That’s down from 3.5% in March.

The report “is consistent with inflation, while still uncomfortably high, slowly coming back to earth,” said Mark Zandi, chief economist at Moody’s Analytics.

The CPI gauges how fast prices are changing across the U.S. economy. It measures everything from fruits and vegetables to haircuts, concert tickets and household appliances.
The April inflation reading is down significantly from its 9.1% pandemic-era peak in 2022, which was the highest level since 1981. However, it remains above policymakers’ long-term target, around 2%.
The decrease in April marks progress in the inflationary fight, which had somewhat flatlined in the first quarter of the year after falling consistently through much of 2023.

The inflation trend line will determine how soon Federal Reserve officials start throttling back interest rates, which influence borrowing costs for consumers and businesses.

“After getting stuck at the beginning of the year, we’re starting to see [inflation] moderate again,” Zandi said. “And I expect to see that going forward.”

Food inflation has ‘basically gone to zero’

Gasoline prices increased 2.8% in the month from March to April, a rise from 1.7% the prior month, the Bureau of Labor Statistics said.
“You saw prices at the pump rise again in April,” said Michael Pugliese, a senior economist at Wells Fargo Economics.
Average U.S. gasoline prices jumped about 13 cents in April, to $3.65 a gallon as of April 29, according to weekly data published by the U.S. Energy Information Administration.

That increase is largely due to dynamics in the market for crude oil, which is refined into gasoline, economists said. Higher fuel prices can filter through to many other areas of the economy since they factor into transportation and distribution costs for goods, for example.
Gas prices have since retreated a bit to $3.61 per gallon as of May 13, according to the EIA.
Among other consumer staples, grocery prices decreased by 0.2% from March to April, meaning they deflated rather than inflated, according to the CPI data. “Food at home” prices rose 1.1% in the past year.
“Food inflation has basically gone to zero,” Zandi said. “I think that’s really important for most American families, not only for their own financial situation but because of how they perceive the economy.”

Progress on housing has been slow

Economists generally like to consider an inflation measure that strips out energy and food prices, which can be volatile, to determine prevailing inflation trends. That reading, known as the “core” CPI, fell to an annual 3.6% in April from 3.8% in March.
Shelter, the largest spending category for the average household, is by far the biggest component of the “core” CPI. Annual housing inflation declined to 5.5% in April from 5.7% in March.
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Positive data trends like moderating prices for newly signed rental leases suggest housing inflation should continue to ease, economists said. However, that process hasn’t happened as quickly as expected.
“It’s one of the reasons we’ve seen slow progress” in the inflation fight, said Stephen Brown, deputy chief North America economist at Capital Economics.
Shelter and gasoline inflation combined contributed more than 70% of the monthly CPI increase for all items, according to the BLS.

Other “notable” areas in core inflation over the past year include motor vehicle insurance (prices are up 22.6%), personal care (3.7%), medical care (2.6%) and recreation (1.5%).
Meanwhile, other consumer categories have seen improvement.
For example, prices for new and used vehicles decreased 0.4% and 6.9% in the past year, respectively. Those lower costs should filter through to help motor vehicle insurance inflation fall, too, economists said.

Supply and demand imbalances

At a high level, imbalances in supply and demand are what trigger out-of-whack inflation.
For example, the Covid-19 pandemic disrupted supply chains for goods. Americans’ buying patterns also simultaneously shifted away from services — such as entertainment and travel — toward physical goods since they stayed at home more, driving up demand and fueling decades-high goods inflation.
Those dynamics have largely unwound, economists said. Rather, inflation is now “more of a services story than it is a goods story,” Pugliese said.
Wage growth has been one contributor to services inflation, for example, economists said.

The services sector of the U.S. economy tends to be more sensitive to labor costs. Record-high demand for workers as the pandemic-era economy reopened pushed wage growth to its highest level in decades; the labor market has since cooled and wage growth has declined, though remains above its pre-pandemic level.
“Until we observe meaningful signs of deterioration in either the labor or housing markets, we expect continued stickiness in inflation measures,” Joe Davis, global chief economist at Vanguard, wrote Tuesday.
Wage growth has surpassed the inflation rate over the last year, meaning consumers have been able to buy more with their paychecks. So-called real average hourly earnings rose 0.5% from April 2023 to April 2024.

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The U.S. Department of Education is giving borrowers more time to meet a key student loan forgiveness deadline.
Those who request a so-called loan consolidation by June 30 — which will combine their federal student loans into one new federal loan — could get their debt canceled sooner than they would have otherwise.
Previously, the deadline to qualify for the Biden administration’s account adjustment was April 30.

President Joe Biden delivers remarks on canceling student debt on February 21, 2024 in Culver City, California.
Mario Tama | Getty Images News | Getty Images

The U.S. Department of Education is giving borrowers more time to meet a key student loan forgiveness deadline.
Those who request a so-called loan consolidation by June 30 — which will combine their federal student loans into one new federal loan — could get their debt canceled sooner than they would have otherwise. Some could even see their debt forgiven immediately.

Previously, the deadline to qualify for the Biden administration’s account adjustment was April 30.
“The Department is working swiftly to ensure borrowers get credit for every month they’ve rightfully earned toward forgiveness,” U.S. Under Secretary of Education James Kvaal said in a statement Wednesday.
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Until June 30, borrowers enrolled in an income-driven repayment plan who consolidate will get a one-time adjustment on their payment count.
They’ll earn credit toward all their loans based on the one they have been making payments on the longest, as well as for certain periods that previously didn’t count, including certain months spent in deferments or forbearances.

Borrowers pursuing the popular Public Service Loan Forgiveness program can also receive additional credit from the payment count adjustment, as long as they certify their qualifying employment for those months.
The payment count adjustment is an attempt to rectify longstanding issues for student loan borrowers.
The Biden administration said in 2022 it would review the accounts of those in income-driven repayment plans, which are supposed to lead to debt cancellation after a set period.
Its announcement followed evidence, including a 2022 U.S. Government Accountability Office report, showing borrowers weren’t always getting a proper accounting of their payments. The Consumer Financial Protection Bureau also found that borrowers were needlessly steered into expensive forbearances, during which interest accrues and credit toward forgiveness is paused.

How the payment count adjustment helps borrowers

Usually, a student loan consolidation restarts a borrower’s forgiveness timeline, making it a terrible move for those working toward cancellation, education experts say.
Now, consolidating to take advantage of the temporary payment count adjustment opportunity is an especially good deal for borrowers who’ve been paying off loans for many years, and for those who carry multiple loans from different time periods. Now all those loans could be soon forgiven.

For example, say a borrower graduated from college in 2004, took out more loans for a graduate degree in 2018 and is now in repayment under an income-driven plan with a 20-year timeline to forgiveness. Consolidating could lead them to immediately qualify for forgiveness on all of those loans, experts say, even though they’d normally need to wait at least another 14 years for full relief.

Read: Education Dept. announces highest federal student loan interest rate in more than a decade

How to check if you’d benefit from consolidation

“Everyone who thinks there is even a possibility they may be eligible should take the time to find out,” said Jane Fox, the chapter chair of the Legal Aid Society’s union. “It is a quick phone call or a check of a website that could mean full cancellation of your student debt.”

You can apply for a Direct Consolidation Loan at StudentAid.gov or with your loan servicer. It should take under 15 minutes to do so, Fox said.
All federal student loans — including Federal Family Education Loans, Parent Plus loans and Perkins Loans — are eligible for consolidation, said higher education expert Mark Kantrowitz.
“If a borrower ends up with more payments than required for forgiveness, the extra payments may be refunded in some circumstances,” Kantrowitz said. More

One of the recent changes to 529 college savings plans is that money can now be converted into a Roth individual retirement account tax-free after 15 years.
There are also higher contribution limits for 2024, a “loophole” for grandparent-owned accounts and potential tax savings, depending on the plan.
Here’s what you need to know.

As the costs at some colleges near $100,000 a year, families need a savings strategy they can bank on.
Financial experts and plan investors agree that 529 college savings plans are a smart choice for many. And, as of 2024, there are even more benefits, including higher contribution limits and the flexibility to roll unused money into a Roth individual retirement account free of tax penalties.

“There are three pretty significant changes this year,” said Vivian Tsai, senior director of education savings at TIAA and chair emeritus for the College Savings Foundation, a nonprofit that provides public policy support for 529 plans.
Whether the funds are for college or vocational studies, she said, “529 plans are better now than they’ve ever been before and they’re more flexible.”
Here’s a breakdown of everything you need to know.

Benefits of a 529 college savings plan

1. Tax deductions or credits for contributions
Even before recent changes, there were already many advantages to a 529 plan. In more than half of all U.S. states, you can get a tax deduction or credit for contributions. Earnings grow on a tax-advantaged basis, and when you withdraw the money, it is tax-free if the funds are used for qualified education expenses.
A few states also offer additional benefits, such as scholarships or matching grants, to their residents if they invest in their home state’s 529 plan.

2. New Roth IRA rollover rules
As of 2024, families can roll over unused 529 plan funds to the account beneficiary’s Roth IRA, without triggering income taxes or penalties, as long as the 529 plan has been open for at least 15 years.
That change follows the Secure Act of 2019, which let 529 users put some of the funds toward their student loan tab: up to $10,000 for each plan beneficiary, as well as another $10,000 for each of the beneficiary’s siblings.
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Previously, tax-advantaged withdrawals were limited to qualified education expenses, such as tuition, fees, books, and room and board. The restrictions loosened in recent years to include continuing education classes, apprenticeship programs and student loan payments. But now, 529s offer much more flexibility, even for those who never go to college, Chris Lynch, president of tuition financing at TIAA recently told CNBC.
“A point of resistance that potential participants have had is the limitation around, what happens if my kid gets a scholarship or decides they’re not going to college,” Lynch said.
In the latter case, you could transfer the funds to another beneficiary or withdraw them and pay taxes and a penalty on the earnings. If your student earns a scholarship, you can typically withdraw up to the amount of the scholarship penalty-free.
However, the added benefit of being able to convert any leftover funds into a Roth IRA tax-free after 15 years, up to a limit of $35,000, “helps to eliminate that point of resistance,” he said.
3. Higher maximum contribution limits
The amount you can contribute to a 529 plan is higher in 2024. This year, parents can gift up to $18,000, or up to $36,000 if you’re married and file taxes jointly, per child without those contributions counting toward your lifetime gift tax exemption, up from $17,000 in 2023. 
High-net-worth families that want to help fund a family member’s higher education could also consider “superfunding” 529 accounts, which allows frontloading five years’ worth of tax-free gifts into a 529 plan.

In this case, you could contribute up to $90,000 in a single year, or $180,000 for a married couple. But then you wouldn’t be able to give more money to that same recipient within a five-year period without it counting against your lifetime gift tax exemption.
“If you have the means, that’s a big deal,” Tsai said.
A larger lump-sum contribution upfront may potentially generate more earnings compared with the same size contribution spread out over a few years because it has a longer time horizon, according to Fidelity.
4. New grandparent ‘loophole’
A new simplified Free Application for Federal Student Aid rolled out at the end of last year, with added benefits for grandparents who own 529 accounts for their grandchildren.
Under the old FAFSA rules, assets held in grandparent-owned 529 college savings plans were not reported on the FAFSA form, but distributions from those accounts counted as untaxed student income, which could reduce aid by up to half of that income.
As part of the FAFSA simplification, students no longer have to answer questions about contributions from a grandparent, effectively creating a “loophole” for grandparents to fund a grandchild’s college fund without impacting their financial aid eligibility.
“In 2024, the grandparent penalty goes away, so 529 plans prove themselves, once again, to be a really exceptional way to save,” Tsai said.
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The median down payment on a home purchase was $26,000 in the first quarter of 2024, or an average of 13.6%, reaching a new first-quarter high, according to a new report by Realtor.com.
While 20% is considered to be the standard, it is by no means “the law of the land.”

Tetra Images | Tetra Images | Getty Images

Consumers are putting down more money to buy a home — but the typical down payment is still much less than you might expect.
The average down payment was 13.6% in the first quarter of 2024, according to a new report by Realtor.com. The median down payment amount was $26,000.

Both figures are up year over year but down from peaks in the third quarter of 2023, the report says. At that point, buyers put down an average of 14.7% or a median of $30,400.
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Even at recent elevated levels, the average down payment is still well below 20%, a share that people typically think of as the gold standard when buying a home.
But 20% is not always necessary, experts say.
There are a lot of reasons why people have gravitated toward the idea of putting 20% down, like trying to avoid mortgage insurance or lessen monthly payments, said Mark Hamrick, senior economic analyst at Bankrate.com.

“But by no means is this essentially the law of the land,” Hamrick said.

Putting 20% down is ‘definitely not required’

One way to reduce your monthly mortgage payment is by putting down more money and borrowing less. But for many households, trying to get a higher down payment can be challenging, said Danielle Hale, chief economist at Realtor.com.
“It really showcases the conundrum the housing market is in where there’s not a lot of affordability,” she said.
Having enough savings for a down payment is a big hurdle for most buyers. Close to 40% of Americans who don’t own a house point to a lack of savings for a down payment as a reason, according to a 2023 CNBC Your Money Survey conducted by SurveyMonkey. More than 4,300 adults in the U.S. were surveyed in late August for the report.
Rising home prices make that 20% goal especially daunting. But the reality is, you don’t need 20%, experts say.
“Not only is it possible to buy a home with less than 20% down, but this data show that a majority of buyers are in fact doing so,” Hale said. “It’s definitely not required.”
Nationally, the average down payment on a house is closer to 10% or 15%, Hale said. In some states, the average is well below 20% while some are even below 10%, she added.

Some loans and programs are available to help interest buyers purchase homes through lower down payments.
For example, the Department of Veterans Affairs offers VA loan programs that enable those who qualify to put down as little as 0%. Loans from the U.S. Department of Agriculture, referred to as USDA loans, are geared toward helping buyers purchase homes in more rural areas, and they also offer 0% down payment options.
Federal Housing Administration loans, which can require as little as 3.5% down for qualifying borrowers, are available to first-time buyers, low- and moderate-income buyers, as well as buyers from minority groups. Those are “designed to help close homeownership gaps among those targeted populations,” Hale said.
Even with a conventional loan, buyers’ required down payment could be between 3% and 5%, depending on their credit score and other factors.
“There are options,” Hale said.

A small down payment can be a ‘mixed bag’

When you’re deciding how much of a down payment you can afford, tread carefully: There can be added costs associated with smaller upfront payments. While a lower down payment is one way to “attack affordability challenges,” it can be a “mixed bag,” Hamrick said.
With a lower down payment, you will need to borrow more from your lender, which raises the monthly cost of your mortgage, Hale said. A smaller down payment can also mean you don’t qualify for a lender’s best-available interest rate.
When you borrow more than 80% of a home’s value, you may also face the added cost of private mortgage insurance, or PMI.

PMI, generally, can cost anywhere from 0.5% to 1.5% of the loan amount per year, depending on factors like your credit score and down payment amount, according to The Mortgage Reports.
For example, on a loan for $300,000, mortgage insurance premiums could cost around $1,500 to $4,500 annually, or $125 to $375 a month, the site found.
Typically, your lender will cancel your mortgage insurance automatically once you reach 22% equity. You can request it to be removed after you reach 20% equity.
In some cases, buyers might choose to do what’s called a “piggyback mortgage,” or get a second mortgage to meet the 20% threshold and not have to pay for mortgage insurance, Hale said.
But, that second loan tends to have a higher mortgage rate, she said.
Correction: A previous version of this article misstated the name of the Federal Housing Administration.

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Many provisions from the Tax Cuts and Jobs Act, or TCJA, of 2017 are slated to expire after 2025, unless Congress passes legislation to extend them.
The federal budget deficit could complicate proposals from former President Donald Trump and President Joe Biden.
Fully extending the TCJA tax breaks could add an estimated $4.6 trillion to the deficit over the next decade, according to the Congressional Budget Office.

Joe Biden and Donald Trump 2024.
Brendan Smialowski | Jon Cherry | Getty Images

The next U.S. president will face trillions in expiring tax breaks. While President Joe Biden and former President Donald Trump have shared early proposals, the federal budget deficit could complicate plans, experts say.
Enacted under Trump, the Tax Cuts and Jobs Act, or TCJA, of 2017 lowered federal income tax brackets, raised the standard deduction, and doubled estate and gift tax exemption, among other individual provisions. Many TCJA tax breaks are temporary and slated to sunset after 2025 unless Congress passes legislation to extend them.

“It’s a massive tax cliff,” said Erica York, senior economist and research manager with the Tax Foundation’s Center for Federal Tax Policy.
The decision on how to handle expiring provisions “affects virtually all aspects of the tax code and affects the vast majority of American taxpayers,” she said.
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However, the federal budget deficit will be a “huge sticking point” amid tax negotiations, York said.
Fully extending the TCJA tax breaks could add an estimated $4.6 trillion to the deficit over the next decade, according to a Congressional Budget Office report released on May 8.

Of course, several economic and political factors through 2025 may impact legislators’ desire to pay for any tax cut extensions.
“You have a game of three-dimensional chess going on,” said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center. “What’s the economy going to be like? Who’s going to be in control of Washington? What’s the public mood going to be?”
“It’s impossible to predict,” he added.

Plans to tackle expiring Trump tax cuts

Biden’s top economic advisor Lael Brainard on Friday proposed higher taxes on the wealthy and corporations to pay for extended middle-class tax breaks from the TCJA.
“It’s clear we need to end the 2017 tax breaks for the ultra-wealthy and scale back costly permanent corporate tax breaks,” she said during a speech to The Hamilton Project at the Brookings Institution. The TCJA permanently reduced corporate taxes by dropping the top federal rate from 35% to 21%.
By contrast, Biden plans to extend expiring TCJA provisions for those making less than $400,000, according to Brainard.
However, with control of Congress in flux, it’s difficult to predict which, if any, legislative priorities will be enacted.  

Meanwhile, Trump called for sweeping tax cuts at a campaign rally in Wildwood, New Jersey, on Saturday.
“Instead of a Biden tax hike, I’ll give you a Trump middle-class, upper-class, lower-class, business-class big tax cut,” he told the crowd.
Other than support for tariffs on U.S. imports, Trump hasn’t shared specifics on how to fund additional tax cuts.

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It can be tempting to follow the crowd as “meme stocks” like AMC and GameStop surge.
But experts say you should only risk money you’re prepared to lose.

Traders walk the floor during morning trading at the New York Stock Exchange (NYSE) on May 14, 2024 in New York City. 
Spencer Platt | Getty Images

Shares of AMC Entertainment and GameStop have surged once again in a new “meme stock” rally triggered by social media.
A social media account named “Roaring Kitty” posted an image for the first time in three years, prompting the trading frenzy. The man purportedly behind the Roaring Kitty account helped lead a meme stock frenzy between 2020 and 2021.

“This is now like watching a sitcom on repeat,” said Dan Egan, vice president of behavioral finance and investing at Betterment.

In some ways, this time differs from when the stocks surged during the Covid-19 lockdown.
Egan pointed out that this time people aren’t stuck at home bored with stimulus check money in their bank accounts that’s hardly earning any interest.
Roaring Kitty’s first post since 2021 is “ambiguous and kind of interpretable in some way,” he said.
This latest buying frenzy can tempt people to want to be part of a perceived movement, Egan said.

Roaring Kitty gives the impression that a guy is in his basement trading stocks instead of big investors like hedge funds and investment banks, he said.
“We want to be on the side of the underdog and supporting him,” Egan said.

‘It’s like going to Las Vegas’

Committing money to meme stocks comes with risks. Egan said that what may start as an edgy, niche community of investors can turn into a lot of upward pressure on the stock as more investors join in.
Betting on these stocks is a form of gambling, said Ted Jenkin, a certified financial planner and the CEO and founder of oXYGen Financial, a financial advisory and wealth management firm based in Atlanta.
“It’s like going to Las Vegas,” said Jenkin, who is also a member of the CNBC FA Council. “Only play with money that you plan to lose.”
Jenkin said he would tell his clients to be very cautious.
But he told CNBC that he bet on the meme stock frenzy himself — investing $75,000 in AMC on Monday and cashing out eight hours later after he doubled his money.
“You start to see these runs, I mean why not?” Jenkin said. “It’s stupid money.”
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It can be difficult to decide when the right time to sell is, Egan noted.
Investors who weren’t able to profitably sell the stocks in the past may be holding on for a chance to do so now, he said.
Watching the action from the sidelines can be entertaining and a risk-free approach, Egan said.
For those who do decide to bet, it’s best to think of it like a hobby and not risk funds you will need.
“Just don’t bet any money you can’t afford to lose,” Egan said.

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The U.S. Department of Education announced Tuesday the interest rates on federal student loans for the 2024-2025 academic year.
The interest rate on federal undergraduate loans will be 6.53%, the highest rate in at least a decade, according to higher education expert Mark Kantrowitz.

The US Department of Education sign hangs over the entrance to the federal building housing the agency’s headquarters in Washington, D.C., Feb. 9, 2024.
J. David Ake | Getty Images

The U.S. Department of Education announced Tuesday the interest rates on federal student loans for the 2024-2025 academic year.
The interest rate on federal direct undergraduate loans will be 6.53%. That’s the highest rate in at least a decade, according to higher education expert Mark Kantrowitz. The undergraduate rate for the 2023-2024 year is 5.5%.

For graduate students, loans will come with an 8.08% interest rate, compared with the current 7.05%. Plus loans for graduate students and parents will have a 9.08% interest rate, an increase from 8.05% now. Both of those rates haven’t been as high in more than 20 years, Kantrowitz said.
The rise in interest rates could complicate the Biden administration’s efforts to get the student loan crisis under control and relieve borrowers of the pain of interest accrual, experts say. Even as millions of people have benefited from recent debt relief measures, new students will be saddled with more expensive loans for decades to come.

Which borrowers face higher rates 

All federal education loans issued on or after July 1, 2024, will be subject to the new rates.

Sorry, families: You can’t try to evade the rate increase by borrowing ahead of that deadline. Loans for the 2024-25 academic year must be taken out after July 1.
Don’t worry about loans you’ve taken out for previous academic years: most federal student loan rates are fixed, meaning the rates on those existing loans won’t change.
The rate changes apply only to federal student loans. Private loans come with their own — often higher — interest rates.

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