Interest rates on Federal PLUS Loans are fixed. The current interest rates for new Federal PLUS Loans in 2014-2015 are 7.21% for parents of undergraduate students (Federal Parent PLUS Loans) and for graduate and professional students (Federal Grad PLUS Loans).
On August 9, 2013 President Obama signed the Bipartisan Student Loan Certainty Act of 2013 (P.L. 113-28), changing how student loan interest rates are determined. The bill links interest rates on new federal PLUS loans to the 10-year Treasury rate, plus a fixed margin of 4.6%, capped at 10.5%. The new rates for 2013-2014 were retroactive, effective for all loans disbursed on or after July 1, 2013. The interest rates on new loans are still fixed for the life of the loan; however, the each year's new loans will have different fixed rates, based on current market rates. The interest rates on new Federal PLUS loans in subsequent years will change each July 1 based on the yield of the last 10-year Treasury auction in May.
Interest rates on Federal Parent PLUS and Federal Grad PLUS loans are the same. Graduate and professional school students were first able to borrow through the Federal Grad PLUS loan in the 2006-2007 academic year.
Before 2010-2011, there were two parallel federal loan programs, the Federal Family Education Loan Program (FFELP) and the Direct Loan Program. The Federal PLUS Loan was available in both loan programs, but with slightly different interest rates from 2006-2007 to 2009-2010. No new loans have been made in the FFEL program since it was discontinued on July 1, 2010.
| Academic Year | Direct Loans | FFELP |
|---|---|---|
| 2014-2015 | 7.21% | NA |
| 2013-2014 | 6.41% | NA |
| 2012-2013 | 7.90% | NA |
| 2011-2012 | 7.90% | NA |
| 2010-2011 | 7.90% | NA |
| 2009-2010 | 7.90% | 8.50% |
| 2008-2009 | 7.90% | 8.50% |
| 2007-2008 | 7.90% | 8.50% |
| 2006-2007 | 7.90% | 8.50% |
Before 2006-2007, interest rates on Federal PLUS Loans were variable. The next table shows the variable interest rates on Federal PLUS Loans in effect at the time the loans were disbursed.
| Academic Year | Direct Loans | FFELP |
|---|---|---|
| 2005-2006 | 6.10% | 6.10% |
| 2004-2005 | 4.17% | 4.17% |
| 2003-2004 | 4.22% | 4.22% |
| 2002-2003 | 4.86% | 4.86% |
| 2001-2002 | 6.79% | 6.79% |
| 2000-2001 | 8.99% | 8.99% |
| 1999-2000 | 7.72% | 7.72% |
| 1998-1999 | 8.26% | 8.26% |
| 1997-1998 | 8.98% | 8.98% |
| 1996-1997 | 8.72% | 8.72% |
| 1995-1996 | 8.98% | 8.98% |
| 1994-1995 | 8.38% | 8.38% |
| 1993-1994 | 6.64% | 6.64% |
| 1992-1993 | NA | 7.36% |
| 1991-1992 | NA | 9.34% |
| 1990-1991 | NA | 11.49% |
| 1989-1990 | NA | 12.00% |
| 1988-1989 | NA | 10.45% |
Fees on Federal PLUS Loans in 2014-2015 are 4.204% for loans disbursed from 12/1/2013 to 9/30/2014 and 4.292% for loans disbursed from 10/1/2014 to 6/30/2015.
| Year | Total Loan Fees |
|---|---|
| 2014-2015 (10/1/14 - 6/30/15) | 4.292% |
| 2013-2014 (12/1/13 - 9/30/14) | 4.288% |
| 2013-2014 (7/1/13 - 11/30/13) | 4.204% |
| 2012-2013 | 4.0% |
| 2011-2012 and before | 4.0% |
Loan disbursement and default fees are effectively a form of up-front interest. Assuming a 10-year repayment term, a 4% fee is the equivalent of an increase in the interest rate of about seven-eighths to one percentage point. Assuming a 30-year repayment term, a 4% fee is the equivalent of an increase in the interest rate of about one-third to half a percentage point. The relative impact of a fee is greater with a shorter repayment term or if the borrower prepays the loan, since the fee will be amortized over less time. This is why borrowers who plan to pay off a loan early may wish to avoid up-front fees, if possible.
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