Inflation will impact student borrowing by two overlapping groups: those seeking to take out a loan to cover their current or future education expenses, and those who have completed their education and have to pay down student loan debt. For the first group, there isn’t much good news. The knock-on effect of Fed rate hikes is that interest rates for all kinds of loans also rise. Student loan rates are no different. Since federal fixed-interest loan rates are set in May of each year, loans taken out now are already more expensive than loans that were taken out before July 1, 2022. The current interest rate on an undergraduate student loan is 4.99%, up from 3.73% last year. “It’s important to note that federal student loans are a fixed rate based on the year you borrow them… so the current rates are fixed from July 1, 2022, through June 30, 2023,” says Farrington. Farrington warns rates are likely to keep growing this year. Assuming the trend continues into the next year, this would mean any fixed loans taken out after next June will likely have even higher rates. On the bright side, for graduates repaying their loans, inflation would, in theory, make their existing student loans cheaper. “The amount that they borrowed and the interest rates they're paying are usually fixed, meaning that the more that money gets devalued, the less they'll have to pay in real terms on their loans,” says Melanie Hudson, editor-in-chief of EDI Refinance.