Federal student loan interest rates are expected to decrease marginally for the 2025–2026 academic year. Federal Student Loan Interest
Federal student loans have interest rates that are set for the duration of the loan. Loans disbursed between July 1 and June 30 are subject to the new interest rates.
The high yield from the most recent May 10-year Treasury Note auction, held on May 6, 2025, is the basis for the interest rates. Federal Student Loan Interest
The Federal Reserve Board sets the Federal Funds Rate, a short-term interest rate that affects the interest rates on the 10-year Treasury Note. In an effort to curb inflation, which continues to obstinately exceed the Fed’s 2% target, the Fed has been maintaining this high rate.
The shift in interest rates on new federal student loans has no bearing on interest rates on private student loans or previous fixed-rate federal student loans.
Student Loan Interest Rates For 2025 – 2026 on Federal Student Loan Interest
The new interest rates for 2025-26 federal student loans disbursed on or after July 1, 2025 will be:
- 6.392% for undergraduate Federal Direct Stafford Loans
- 7.942% for graduate Federal Direct Stafford Loans
- 8.942% for Federal Direct Grad PLUS Loans
- 8.942% for Federal Direct Parent PLUS Loans
That’s a decrease of 0.141% compared with last year.
That’s not the smallest change in the interest rates. Aside from several years in which the interest rates did not change from the previous year (1997-98, 2007-08, 2012-13), interest rates dropped by 0.05% from 2003-04 to 2004-05.
Previous Years’ Interest Rates on Federal Student Loan Interest
This table shows how the interest rates have increased significantly during the pandemic.
|
Year |
Undergraduate Direct Loan |
Graduate Direct Loan |
PLUS Loans |
|---|---|---|---|
|
2025 – 2026 |
6.392% |
7.942% |
8.942% |
|
2024 – 2025 |
6.533% |
8.083% |
9.083% |
|
2023-2024 |
5.498% |
7.048% |
8.048% |
|
2022 – 2023 |
4.993% |
6.543% |
7.543% |
|
2021 – 2022 |
3.734% |
5.284% |
6.284% |
|
2020 – 2021 |
2.750% |
4.300% |
5.300% |
Interest Rate Formula For New Federal Student Loans
The interest rates on federal student loans are set based on a formula that adds a fixed margin based on the type of loan to the high yield from the last 10-year Treasury Note auction in May. The margins are as follows:
- High yield + 2.05% for the Federal Direct Stafford Loan for undergraduate students, capped at 8.25%
- High yield + 3.60% for the Federal Direct Stafford Loan for graduate students, capped at 9.50%
- High yield + 4.60% for the Federal Direct Grad PLUS Loan, capped at 10.50%
- High yield + 4.60% for the Federal Direct Parent PLUS Loan, capped at 10.50%
The high yield on the 10-year Treasury Note was 4.342% for the auction on May 6, 2025. Thus, the new interest rates are as follows:
- 6.392% for the Federal Direct Stafford Loan for undergraduate students, down from 6.533%
- 7.942% for the Federal Direct Stafford Loan for graduate students, down from 8.083%
- 8.942% for the Federal Direct Grad PLUS Loan, down from 9.083%
- 8.942% for the Federal Direct Parent PLUS Loan, down from 9.083%
Impact Of Rising Interest Rates on Federal Student Loan Interest
The increase in interest rates yields a slight decrease in the monthly student loan payment of about $0.72 per month per $10,000 borrowed, assuming a 10-year repayment term, as compared with last year’s interest rates.
These tables show the impact of the change in interest rates on the monthly student loan payment for each type of federal education loan.
Here’s Undergraduate Direct Loans: Federal Student Loan Interest
|
Year |
Undergraduate Direct Loan |
Monthly Payment Per $10,000 |
Change vs. LY |
|---|---|---|---|
|
2025 – 2026 |
6.392% |
$113. |
-0.63% |
|
2024 – 2025 |
6.533% |
$113. |
19.2% |
|
2023-2024 |
5.498% |
$108. |
13.7% |
|
2022 – 2023 |
4.993% |
$106. |
11.1% |
|
2021 – 2022 |
3.734% |
$99. |
4.8% |
|
2020 – 2021 |
2.750% |
$95. |
0% |
Current Interest Rates On Private Student Loans
The interest rates on private student loans depend on the type of loan and the credit score of the borrower (and cosigner, if any). They also depend on the repayment term. Federal Student Loan Interest
The interest rates for private student loans range from about 4.5% to 16.5% (fixed) and 5.5% to 18% (variable).
The interest rates for private refinance loans range from about 5% to 11% (fixed) and 5% to 11% (variable).
Interest rates on private student loans typically change monthly. You can see a list of private loan lenders and rates here.
Common Questions on Federal Student Loan Interest
How much does a 0.14% drop save over 10 years?
It will only save you about $0.72 per month for every $10,000 borrowed. So, over 10 years, that adds up to $86.40 in savings for every $10,000 borrowed. Federal Student Loan Interest
Should I prioritize federal over private loans with this rate drop?
You should always prioritize federal student loans over private loans, specifically because federal loans offer a variety of features like loan forgiveness, income-driven repayment, and hardship options. Private loans don’t offer those features.
Is refinancing federal loans advisable now?
It’s rarely a good idea to refinance your federal loans. The only exception is if you don’t qualify for loan forgiveness and don’t take advantage of any income-driven repayment plans or hardship options. Even then, you need to shop and compare private loan rates and see if they are lower—they may not be. Federal Student Loan Interest