If you’re heading to graduate school, you might wonder how much interest FAFSA charges for graduate school. The short answer is that FAFSA itself doesn’t charge interest—it’s the federal student loans you get through the FAFSA that do. For graduate students, the interest rate for federal Direct Unsubsidized Loans is fixed, and it changes each year for new loans.
As of July 1, 2026, the interest rate for graduate Direct Unsubsidized Loans is 6.31% for loans disbursed between July 1, 2026, and June 30, 2027. This rate is set by Congress and based on the 10-year Treasury note, so it can vary from year to year. Your actual rate depends on when your loan is first disbursed, not when you apply.
Graduate students also borrow through the Grad PLUS Loan, which has a higher interest rate—currently 8.16% for the same period. Unlike undergraduate loans, graduate loans are not subsidized, meaning interest starts accruing right away, even while you’re in school.
Understanding Federal Graduate Loan Interest Rates
The interest rates for federal graduate loans are fixed for the life of the loan. That means once you take out a loan, your rate won’t change, even if market rates go up. The rates are set annually for new loans, so each academic year might have a different rate.
Here’s a breakdown of the current rates for graduate students:
| Loan Type | Interest Rate (July 1, 2026 – June 30, 2027) | Loan Fee |
|---|---|---|
| Direct Unsubsidized Loan (Graduate) | 6.31% | 1.057% |
| Grad PLUS Loan | 8.16% | 4.228% |
These rates are fixed and apply to new loans taken out for the 2026-2027 academic year. The loan fee is a percentage deducted from the loan amount before disbursement, so you receive slightly less than you borrow.
Interest on graduate loans begins accruing immediately, even during deferment periods. Unlike undergraduate subsidized loans, the government does not pay interest for graduate students. This can significantly increase the total amount you owe if you don’t make payments while in school.
How Interest Is Calculated on Graduate Loans
Federal student loan interest is calculated using a simple daily interest formula. To find your daily interest, multiply your loan balance by the interest rate, then divide by 365. For example, if you borrow $20,000 at 6.31%, your daily interest would be about $3.45.
That daily interest adds up over time. If you’re in a two-year master’s program and don’t pay anything during school, interest will accrue for about 730 days. On a $20,000 loan, that’s roughly $2,500 in interest by the time you graduate.
When you enter repayment, any unpaid interest is capitalized—added to your principal balance. This means you’ll pay interest on the interest, which can increase your total cost. To avoid this, consider making interest payments while you’re still in school.
Comparing Graduate Loan Options
Graduate students have two main federal loan options: Direct Unsubsidized Loans and Grad PLUS Loans. Both have different rates and fees, so it’s important to compare them.
- Direct Unsubsidized Loans have a lower interest rate and lower fees, but there’s an annual borrowing limit—$20,500 for graduate students.
- Grad PLUS Loans have a higher rate and higher fees, but you can borrow up to the full cost of attendance minus other aid.
- Direct Unsubsidized Loans require you to be enrolled at least half-time, while Grad PLUS requires a credit check.
- Both loans offer income-driven repayment plans, but Grad PLUS loans are eligible for fewer plans than Direct Unsubsidized Loans.
Most graduate students use Direct Unsubsidized Loans first, then turn to Grad PLUS if they need more funding. Private loans are another option, but they often have variable rates and fewer borrower protections.
Repayment Strategies to Minimize Interest
Paying interest while you’re in school is one of the best ways to reduce your total cost. Even small monthly payments can make a big difference. For example, paying $50 a month toward interest on a $20,000 loan could save you hundreds over time.
Once you graduate, you’ll have a six-month grace period before repayment begins. Use this time to plan your budget and consider refinancing options, but be careful—refinancing federal loans with a private lender means losing federal benefits like income-driven repayment and loan forgiveness.
If you’re pursuing a career in public service, you might qualify for Public Service Loan Forgiveness (PSLF) after 120 qualifying payments. This program forgives the remaining balance on Direct Loans, but you must work for a qualifying employer and make payments under an income-driven plan.
How to Find Your Exact Interest Rate
The U.S. Department of Education publishes interest rates for each academic year on its official website. Your loan servicer will also provide your specific rate and terms in your loan disclosure statement. Always read these documents carefully.
If you have multiple federal loans, each may have a different interest rate depending on when they were disbursed. Your servicer’s website will list all your loans and their individual rates. You can also use the National Student Loan Data System to see your federal loan history.
Remember that interest rates for federal loans are set by law and are the same for all borrowers at a given loan type and disbursement date. Your credit score does not affect federal loan rates, unlike private loans.
Final Thoughts on Graduate Loan Interest
Understanding how much interest FAFSA charges for graduate school helps you plan your borrowing and repayment. While the current rate for Direct Unsubsidized Loans is 6.31% and Grad PLUS is 8.16%, these rates can change each year. Always check the official federal student aid website for the latest figures.
To minimize interest, borrow only what you need, make interest payments during school, and explore loan forgiveness options if you qualify. With careful planning, you can manage your graduate debt and focus on your education.
Frequently Asked Questions
Does FAFSA charge interest on graduate loans?
No, FAFSA itself does not charge interest; it’s the federal student loans you receive through FAFSA that accrue interest. Graduate loans have fixed interest rates set annually.
What is the current interest rate for graduate student loans?
For the 2026-2027 academic year, the interest rate is 6.31% for Direct Unsubsidized Loans and 8.16% for Grad PLUS Loans. These rates are fixed for the life of the loan.
Do graduate loans accrue interest while I’m in school?
Yes, all federal graduate loans accrue interest from the day they are disbursed, even while you are enrolled. There is no subsidy for graduate loans, so interest starts immediately.
Can I avoid paying interest on my graduate loans?
You cannot avoid accruing interest, but you can make interest payments while in school to prevent capitalization. Paying even a small amount can reduce your total cost.
How often do graduate loan interest rates change?
Interest rates for federal student loans are set each academic year, typically announced in May or June, and apply to loans disbursed from July 1 to June 30 of the following year.
