Federal Student Loan Interest Rates to Drop by Half Percent

Every year on July 1, the interest rates on Direct Subsidized and Unsubsidized Loans and PLUS Loans reset.

For the 2016-2017 academic year, rates are set to drop by .53%. The new rates will be in effect for new loans borrowed from July 1, 2016 to June 30, 2017. The rate changes do not affect loans borrowed prior to July 1, 2016 or Perkins Loans.

Here are the federal student loans that will have the new, lower rates:

Loan Type 2015-2016 Interest Rate
(Fixed)
2016-2017 Interest Rate
(Fixed)
Direct Subsidized and Unsubsidized Loans for Undergraduate Students 4.29% 3.76%
Direct Unsubsidized Loans for Graduate Students 5.84% 5.31%
Grad PLUS Loans  6.84% 6.31%
Parent PLUS Loans 6.84% 6.31%

This rate reduction could save you $302.48 in interest for a $10,000 federal student loan repaid over a 10-year period, or $671.07 in interest for a $10,000 loan repaid over a 20-year period.

These new interest rates will help you calculate loan costs for the 2016-2017 school year, but don't forget about fees. The current loan fee for Direct Subsidized and Unsubsidized Loans is 1.068%. The current fee for both Grad PLUS Loans and Parent PLUS Loans is 4.272%. These fees apply to loans first disbursed from October 1, 2015 to September 30, 2016. On October 1, 2016, the fees will change.

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