While uncertainty about what higher education will look like for the coming year abounds, enrolling and completing college remains crucial for social and economic mobility. For students and families facing complex decisions, July 1 is an important date: it is when most changes to federal student aid – both loans and grants – go into effect. For the year starting July 1, 2020, the maximum Pell Grant will be higher, and new federal loans for undergraduates, graduate students, and parents will have much lower fixed interest rates than loans taken out the year before.
To help inform college borrowing decisions, we have a new, easy-to-read chart with 2020-21 interest rates, loan amounts, and other useful information for the most common types of federal loans. Additionally, you will find information about student loan relief during COVID-19 below.
The coming changes include:
- On July 1, the maximum Pell Grant will increase to $6,345 up from $6,195. Pell Grants help nearly seven million low- and moderate-income students pay for college and reduce how much they need to borrow.
- Even with the increase, this year’s maximum Pell Grant covers the smallest share of college costs in the program’s history. In the 1980s, the maximum Pell Grant covered over half the cost of tuition, fees, room, and board at a four-year public college. In contrast, the $6,345 maximum Pell Grant for 2020-21 covers just 28 percent of the cost of college.
- On July 1, the fixed rates for new federal loans will be much lower than the rates for loans issued last year.
- Stafford loans for undergraduates, subsidized and unsubsidized: 2.75% for loans issued in 2020-21 (a sharp decrease from 4.53% for loans issued in 2019-20).
- Stafford loans for graduate students: 4.30% for loans issued in 2020-21 (down from 6.08% for loans issued in 2019-20).
- Parent and Graduate PLUS loans: 5.30% for loans issued in 2020-21 (down from 7.08% for loans issued in 2019-20).
- On October 1, origination fees will decrease slightly for new federal loans.
- For loans issued October 1, 2020 through September 30, 2021, fees will be 1.057% of principal for all Stafford loans (down from 1.059%) and 4.228% for all PLUS loans (down from 4.236%).
For more information about federal student loans for the coming school year, see our summary chart, Federal Student Loan Terms for 2020-21.
For Students and Borrowers Impacted by COVID-19:
- In March, the President signed into law a massive economic relief bill that includes help for federal student loan borrowers. See the Department of Education’s website for specifics on how the law affects federal loan borrowers.
- The bill directs the Department to automatically suspend payments on most federal student loans from March 13, 2020 through September 30, 2020. No interest will accrue on loans during this time. After September 30, this payment suspension and interest waiver will end. You should continue to receive information from your student loan servicer throughout this process about how it works.
- All months of payment suspension will count as “qualifying payments” if you’re working toward forgiveness under Public Service Loan Forgiveness or income-driven repayment.
For more, see Resources for Students and Borrowers Impacted by COVID-19.
