The interest rate on a federal student loan depends on when you borrow and the type of loan you get. For the 2026–27 school year, rates are set each July and apply to new loans. This article explains current rates, how they work, and what they mean for your monthly payments.
Federal student loans are issued by the U.S. Department of Education. They have fixed interest rates, meaning the rate stays the same for the life of the loan. Knowing your rate helps you plan your budget and compare repayment options.
Current Interest Rates for Federal Student Loans
For loans disbursed between July 1, 2026, and June 30, 2027, the interest rates are as follows (based on the rates set by Congress using the 10-year Treasury note plus a fixed add-on):
| Loan Type | Interest Rate (2026–27) |
|---|---|
| Direct Subsidized Loans (undergraduate) | 5.99% |
| Direct Unsubsidized Loans (undergraduate) | 5.99% |
| Direct Unsubsidized Loans (graduate/professional) | 7.99% |
| DIRECT PLUS Loans (parents and graduate students) | 9.99% |
These rates are fixed for the life of the loan. They do not change even if market rates rise later. For loans borrowed before July 1, 2026, the rates are different because they were set in earlier years.
How Are Federal Student Loan Interest Rates Determined?
The U.S. Congress sets the formula for federal student loan interest rates. Each year, the rate is based on the high yield of the 10-year Treasury note at the last auction held before June 1. Then, a fixed add-on is applied based on the loan type.
- Undergraduate loans: 10-year Treasury note + 2.05%
- Graduate unsubsidized loans: 10-year Treasury note + 3.60%
- PLUS loans: 10-year Treasury note + 4.60%
Because the Treasury yield changes each year, rates can go up or down. However, once you take out a loan, your rate is locked in forever. This means your rate might be higher or lower than what a new borrower gets later.
Why Interest Rates Matter for Your Monthly Payment
Interest is the cost of borrowing money. It is added to your loan balance each day, and when you start repayment, your monthly payment covers both principal and interest. A higher interest rate means a larger monthly payment and more total interest paid over time.
For example, a $10,000 loan at 5.99% over 10 years would have a monthly payment of about $111. If the rate were 7.99%, the payment would be about $121. That difference adds up over the life of the loan.
How to See Your Loan’s Interest Rate
You can find your exact interest rate by logging into your account at the Federal Student Aid website (studentaid.gov). Your loan servicer also provides this information on your billing statement. Always check your loan details before making extra payments or consolidating.
Fixed vs. Variable Rates: What’s the Difference?
Federal student loans have fixed interest rates, which means they never change. Private student loans may have fixed or variable rates. Variable rates can go up or down over time, making your payments unpredictable. Fixed rates give you stability and make budgeting easier.
Because federal rates are fixed, they are often a safer choice than private loans with variable rates. However, if market rates drop significantly, you might consider refinancing with a private lender, but that would mean losing federal benefits like income-driven repayment and loan forgiveness.
How Interest Accrues While You’re in School
For subsidized loans, the government pays the interest while you are enrolled at least half-time, during your grace period, and during deferment. For unsubsidized loans, interest starts accruing from the day the loan is disbursed. If you don’t pay that interest while in school, it is capitalized—added to your principal—which increases your total debt.
To avoid capitalization, you can make interest-only payments while in school. Even small payments can save you money in the long run. If you can’t afford payments, contact your loan servicer to discuss options.
What About Loan Fees?
In addition to interest, federal student loans have an origination fee. This fee is a percentage of the loan amount and is deducted from the money you receive. For loans disbursed between July 1, 2026, and June 30, 2027, the origination fee is 1.057% for Direct Subsidized and Unsubsidized Loans, and 4.228% for PLUS Loans.
The fee is not a penalty; it’s a cost of getting the loan. It reduces the amount you actually receive, but you still owe the full loan amount. Keep this in mind when calculating how much you need to borrow.
Tips to Manage Your Student Loan Interest
- Always borrow only what you need, not the maximum offered.
- Make interest payments while in school to prevent capitalization.
- Set up autopay to get a 0.25% interest rate reduction on most federal loans.
- Consider making extra payments toward the principal to reduce total interest.
- Explore income-driven repayment plans if your monthly payment is too high.
How to Get the Best Rate for Your Situation
The interest rate on federal student loans is set by law, so you can’t negotiate it. However, you can minimize your overall cost by choosing subsidized loans first, since the government covers interest while in school. If you need additional funds, use unsubsidized loans before considering PLUS loans, which have the highest rate.
If you are a parent considering a PLUS loan, remember that the rate is higher than other federal loans. You might also explore private loans, but they often have variable rates and fewer borrower protections. Always exhaust federal options first.
Summary
Knowing the interest rate on your federal student loan is essential for planning your finances. For 2026–27, undergraduate rates are 5.99%, graduate unsubsidized loans are 7.99%, and PLUS loans are 9.99%. These rates are fixed, so they won’t change over time. Always check your loan details, make interest payments if possible, and take advantage of autopay discounts. By understanding how interest works, you can make smarter borrowing decisions and save money over the life of your loan.
Frequently Asked Questions
What is the interest rate on a federal student loan for 2026?
For loans disbursed between July 1, 2026, and June 30, 2027, the interest rate is 5.99% for undergraduate Direct Subsidized and Unsubsidized Loans, 7.99% for graduate unsubsidized loans, and 9.99% for PLUS loans.
Are federal student loan interest rates fixed?
Yes, all federal student loans have fixed interest rates, meaning the rate stays the same for the entire life of the loan, even if market rates change.
How often do federal student loan interest rates change?
Rates are set once a year for new loans, based on the 10-year Treasury note auction in May. The new rate applies to loans disbursed from July 1 of that year to June 30 of the next year.
Can I get a lower interest rate on my federal student loan?
You cannot negotiate the rate, but you can reduce your effective interest cost by signing up for autopay, which gives a 0.25% rate reduction, and by making extra principal payments to lower the total interest accrued.
Do subsidized and unsubsidized loans have the same interest rate?
For undergraduate students, both subsidized and unsubsidized loans have the same interest rate (5.99% for 2026–27). The difference is that the government pays interest on subsidized loans while you are in school, but not on unsubsidized loans.
