College and graduate students taking out federal loans for the coming academic year are about to see their borrowing costs climb by as much as 18 percent.

That doesn’t mean you should avoid federal student loans, but you will need to be even more cautious about the amount you borrow, says financial aid expert Kal Chany, author of “Paying for College Without Going Broke.”

Beginning in July, the interest rate on federal undergraduate loans will jump to 4.45 percent, up from 3.76 percent previously. The increase is based on the recently set 10-year Treasury rate, and it applies to loans taken out to pay for the 2017–2018 academic year.

The rates are higher for graduate students and parent borrowers. Graduate students will pay a 6 percent rate vs. 5.31 percent currently, while the parent PLUS loan will rise from 6.31 percent to 7 percent.

Despite the impending increase, federal loans remain a relatively good deal for borrowers. “Student loan rates are still near historic lows," says Chany. Just three years ago, during the 2014–2015 academic year, the rate was 4.66 percent.

The rate rise alone does not add a lot to the average student’s debt burden. A college freshman taking out a $3,500 federal student loan for the fall will pay $138 more in interest over the standard 10-year repayment period, according to Chany’s calculations. (That’s assuming a subsidized loan, which does not rack up interest while the student is in school.)

The bigger problem is the total amount of borrowing needed to pay for a degree. The average student debt load now exceeds $30,000, and many graduates are struggling with repayment. An analysis from the Institute for College Access and Success, a nonprofit group, shows that for borrowers who began repaying in 2013, some 11 percent had fallen into default by 2015.

A recent move by Secretary of Education Betsy DeVos may make repayment even more difficult. DeVos ordered the withdrawal of new federal rules intended to ensure borrowers got the service and consumer protection they deserve.

It's not only students and their parents who are concerned about college affordability and the difficulties of paying loans back. According to our most recent Consumer Voices Survey, 69 percent of all Americans lack confidence that everyone who seeks higher education will be able to pay for it.

Before You Borrow

All the more reason to be sure you avoid taking on too much student loan debt. Here are some guidelines to follow:

• Don’t borrow more than you can realistically repay. A smart strategy is to limit your borrowing to no more than you expect to earn annually in the early years of your career, which can help you limit your monthly payments to no more than roughly 10 percent to 15 percent of your expected gross income. If more than 15 percent of your earnings goes to student loan payments, you’ll struggle to pay and need to cut spending in other areas of your life.

• Be wary of private loans. “A federal student loan is almost always a better choice than a private student loan,” says Jason Delisle, a student loan expert and fellow at the American Enterprise Institute. A private loan rate is often variable, which means it is likely to rise over time, so you end up owing a lot more in interest. By contrast, with a federal loan, you have fixed rates and the option of flexible repayment programs. That includes programs such as income-based repayment, which can make your loan payments more affordable. (For more information on these options, go to

Keep good records. Once you move into repayment mode, be sure you know which company is servicing your loan and what kind of loans you have. You will also need to keep records of what you owe and the payments you’ve made. If you have federal loans, you can find the name and contact info for your servicer in this national database. If you have a private student loan, check your credit report to see which firm is listed as a servicer. You can get a free copy of your annual credit report at

If you need more help managing your student loans, try the American Student Assistance’s SALT program, which provides courses, individual counseling, and online tools.