Federal Student Loan Interest Rates Are Going Up for 2026-27

Federal student loan interest rates are on the rise for the upcoming academic year, signaling a continued trend of high borrowing costs for undergraduate students. The new rates, determined by the recent Treasury auction results, will apply to federal student loans disbursed between July 1, 2026, and June 30, 2027. Existing federal loans will maintain their current fixed rates.

Undergraduate student loans will see an interest rate of 6.52%, a slight increase from the previous academic year’s rate of 6.39%. Graduate direct loans will have an 8.07% interest rate, up from 7.94%, while PLUS loans for parents and graduate borrowers will carry a rate of 9.07%, up from 8.94%. It’s important to note that certain existing borrowers will be eligible for PLUS loans under new federal regulations starting this summer.

While the rate increases for this year are moderate, they contribute to the overall trend of elevated borrowing costs compared to previous years. Federal loan rates for undergraduates remained below 5% for much of the 2010s before rising in recent years alongside Treasury yields and overall borrowing costs.

The higher borrowing costs come at a time when the federal student loan system is undergoing significant changes under the One Big Beautiful Bill Act (OBBBA). This legislation will introduce new borrowing limits for parents and graduate students and phase out several existing income-driven repayment (IDR) plans, replacing them with a new program called the Repayment Assistance Plan (RAP).

Federal student loan interest rates are determined by law and linked to the government’s borrowing costs. Each year, rates are calculated using the high yield of the 10-year Treasury note from a May auction, plus a fixed percentage point. These rates are fixed for the duration of the loan, providing borrowers with a consistent interest rate until repayment, regardless of market rate fluctuations. Federal student loans also come with upfront origination fees, currently set at 1.057% for Direct Subsidized and Unsubsidized loans and 4.228% for PLUS loans.

It’s important to differentiate federal student loan rates from private loan rates, as private lenders set their rates based on factors such as credit history and the presence of a cosigner. While private loan rates may appear lower, experts generally recommend maximizing federal loan options before turning to private financing due to the borrower protections, forgiveness programs, and repayment plans offered by federal loans.

In conclusion, the upcoming academic year will see a rise in federal student loan interest rates, continuing the trend of elevated borrowing costs for undergraduate, graduate, and parent borrowers. As the federal student loan system undergoes changes with the implementation of the OBBBA, it’s crucial for students to stay informed about their borrowing options and repayment plans to make informed financial decisions.