We now have an estimate for federal student loan interest rates for loans disbursed on or after July 1, 2025. While a slight decrease from last year is anticipated, rates remain near historic highs.
Estimated Federal Student Loan Interest Rates for 2025-2026
Federal student loan interest rates can be projected based on the results of the 10-year Treasury Note auction, which were released yesterday. Since the formula for determining these rates is established by law, we now have a reliable prediction for the rates effective July 1, 2025.
For academic years 2025-2026 (July 1, 2025 – June 30, 2026), the interest rates will be:
| Loan Type | 2025-2026 Award Year |
|---|---|
| Undergraduate Federal Direct Stafford Loans (Subsidized and Unsubsidized) | 6.39% |
| Graduate Federal Direct Stafford Loans (Unsubsidized) | 7.94% |
| Direct PLUS Loans (for parents, and graduate and professional students) | 8.94% |
Historical Direct Stafford Loan Interest Rates
It’s interesting to see where interest rates were, just a few years ago, to compare them to the upcoming 2025-2026 year.
| Award Year | Direct Loans (Undergraduate) |
Direct Loans (Graduate) |
Direct PLUS Loans (Parent and Graduate/Professional Student) |
|---|---|---|---|
| 2024-2025 | 6.53% | 8.08% | 9.08% |
| 2023-2024 | 5.5% | 7.05% | 8.05% |
| 2022-2023 | 4.99% | 6.54% | 7.54% |
| 2021-2022 | 3.73% | 5.28% | 6.28% |
| 2020-2021 | 2.75% | 4.3% | 5.3% |
| 2019-2020 | 4.53% | 6.08% | 7.08% |
| 2018-2019 |
5.05% |
6.6% |
7.6% |
| 2017-2018 |
4.45% |
6% |
7% |
| 2016-2017 |
3.76% |
5.31% |
6.31% |
| 2015-2016 |
4.29% |
5.84% |
6.84% |
How Interest Rates Are Set
Federal law determines interest rates, which are based on the outcome of the 10-year Treasury Note auction. The auction held on May 6, 2025, for the 10-year Treasury Note is used in the formula to calculate student loan interest rates for the upcoming 2025-2026 academic year.
Can the Federal Student Loan Interest Rates Be Lowered?
With the rising cost of living affecting everyday life, many are questioning whether federal student loan interest rates could be reduced to ease financial pressure. Unfortunately, lowering these rates would require an act of Congress. The Trump administration has proposed many bills which may impacts how interest rates are calculated in the future, at this time, we don't have a bill which will impact interest rates for the academic year starting July 1, 2025.
We continue to expect federal student loan interest rates in the 2025-2026 award year to reflect market current trends.
The Total Cost of Federal Student Loans
Beyond the daily cost of borrowing a loan, the interest charged, federal student loans also charge origination fees. The additional costs depend on the type of loan borrowed.
The origination fee is deducted from the total amount you borrow. What does that mean? If you were to borrow a $5,000 Direct Unsubsidized Loan, the total amount used to help pay your college costs would be, $4,921.50. That's because the $5,000 would remove the $78.50 origination fee from the amount paid to your account.
| Loan Type | Date of First Disbursement | Origination Fees |
|---|---|---|
| Direct Subsidized and Direct Unsubsidized Loans | Loans first disbursed on or after Oct. 1, 2020 through Sept. 30, 2025 | 1.057% |
| Direct PLUS Loans | Loans first disbursed on or after Oct. 1, 2020 through Sept. 30, 2025 | 4.228% |
The Impact on Student Loan Repayment
Direct Subsidized Loan for an undergraduate student
Loan amount: $5,000
Repayment term: 10 years
Repayment plan: Standard 10-year Plan
| 2023-2024 Interest Rate of 5.50% | 2024-2025 Interest Rate of 6.53% |
2025-2026 Interest Rate of 6.39% |
|---|---|---|
|
Monthly payment: $54.26 Total interest paid in 10 years: $1,511.58 Total cost of the loan: $6,511.58 |
Monthly payment: $56.85 Total interest paid in 10 years: $1,822.04 Total cost of the loan: $6,822.04 |
Monthly payment: $56.49 Total interest paid in 10 years: $1,779.35 Total cost of the loan: $6,779.35 |
* This example is showing the cost if no payments were made while in-school, and interest has not been capitalized to the outstanding principal balance.
Borrowing Responsibly in a Changing Financial Landscape
In this evolving economic environment, the principle of borrowing responsibly has never been more important. Students and parents who plan to borrow for the upcoming year should carefully consider the total cost of borrowing when planning for college expenses. Exploring additional funding sources, such as scholarship, grants, tuition payment plans, and work-study, can help mitigate the impact of rising loan costs.
For those already managing student loans, exploring repayment options and strategies, such as income-driven repayment plans, or forgiveness opportunities, can offer pathways to manage debt more efficiently.