Federal student loan interest rates for the 2026-2027 school year are set by Congress and based on the 10-year Treasury note. For undergraduate Direct Subsidized and Unsubsidized Loans, the rate is 5.99%. For graduate or professional Direct Unsubsidized Loans, the rate is 7.99%. Direct PLUS Loans (for parents and graduate students) have an interest rate of 9.99%. These rates are fixed for the life of the loan, meaning they will not change over time.
How are federal student loan interest rates determined?
The U.S. Department of Education sets new interest rates each July for loans disbursed from July 1 through June 30 of the following year. The rates are tied to the high yield of the 10-year Treasury note at the final auction in May, plus a fixed add-on percentage. This formula is established by federal law and applies to all Direct Loans made under the William D. Ford Federal Direct Loan Program.
Because the Treasury note yield changes yearly, rates can go up or down. For example, the 2025-2026 rates were 5.99% for undergraduate loans, 7.99% for graduate loans, and 9.99% for PLUS loans. The 2026-2027 rates remain the same as the previous year, but future years may differ.
Interest rates for different federal loan types (2026-2027)
Here is a clear breakdown of the current fixed interest rates for federal student loans. These rates apply to loans first disbursed on or after July 1, 2026, and before July 1, 2027.
| Loan Type | Borrower | Interest Rate |
|---|---|---|
| Direct Subsidized Loan | Undergraduate (with financial need) | 5.99% |
| Direct Unsubsidized Loan | Undergraduate | 5.99% |
| Direct Unsubsidized Loan | Graduate or professional | 7.99% |
| Direct PLUS Loan (parent or grad) | Parent of dependent undergraduate, or graduate/professional | 9.99% |
All rates are fixed for the life of the loan. That means if you borrow at 5.99%, your rate will never increase, even if market rates rise.
How interest accrues on federal student loans
Interest on federal student loans accrues daily based on your loan’s principal balance and interest rate. For example, a $10,000 undergraduate loan at 5.99% will accrue about $1.64 in interest per day (calculated as $10,000 x 0.0599 / 365).
For subsidized loans, the government pays the interest while you are in school at least half-time, during the grace period, and during deferment. For unsubsidized loans, you are responsible for all interest that accrues from the day the loan is disbursed, even while you are in school.
If you do not pay the interest as it accrues, it may be capitalized—added to your principal balance—which means you will pay interest on that interest later. This can increase the total cost of your loan significantly.
How to find your exact interest rate
Your actual interest rate depends on when your loan was first disbursed. The U.S. Department of Education assigns a rate based on the loan’s disbursement date, not the date you applied or signed the Master Promissory Note.
To see your specific rates, log in to your account on the Federal Student Aid website (studentaid.gov). You can also contact your loan servicer, who manages your loan payments and can provide your current rate and balance.
What about private student loans?
Private student loans have variable or fixed rates that depend on your credit score and market conditions. They are not set by the federal government and can be higher or lower than federal rates. Federal loans generally offer more borrower protections, such as income-driven repayment and loan forgiveness, which are not typically available with private loans.
Tips to manage your federal student loan interest
Understanding your interest rate is the first step to managing your debt. Here are some practical strategies to reduce the total interest you pay:
- Make interest payments while you are in school, even if you are not required to, to prevent capitalization.
- Pay more than the minimum payment each month, directing the extra amount toward the principal.
- Set up automatic payments to receive a 0.25% interest rate reduction (offered by most servicers).
- Consider consolidating or refinancing only if you are certain you will not lose federal benefits—but be careful, as refinancing with a private lender removes federal protections.
- Use the loan simulator on the Federal Student Aid website to estimate your payments under different repayment plans.
What to do if rates increase in the future
If you have already borrowed at a lower rate, your existing loans keep that rate. If you are borrowing for the first time, you cannot lock in a rate for future years—each year’s loan has a new rate based on that year’s formula. To minimize risk, borrow only what you need and exhaust federal aid before considering private loans.
Also, remember that federal student loan interest is tax-deductible up to $2,500 per year, subject to income limits. This deduction can reduce your taxable income, providing some relief.
Summary
For the 2026-2027 academic year, federal student loan interest rates are 5.99% for undergraduate direct loans, 7.99% for graduate direct unsubsidized loans, and 9.99% for PLUS loans. These are fixed rates set by law, based on the 10-year Treasury note. Always check the Federal Student Aid website for the most current rates and your personal loan details. By understanding how interest works and making strategic payments, you can manage your student debt effectively.
Frequently Asked Questions
What are the current interest rates for federal student loans?
For the 2026-2027 school year, undergraduate direct loans have a fixed rate of 5.99%, graduate unsubsidized loans have a rate of 7.99%, and PLUS loans have a rate of 9.99%.
Do federal student loan interest rates change every year?
Yes, new rates are set each July for loans disbursed in the following 12 months, based on the 10-year Treasury note auction in May.
Are federal student loan interest rates fixed or variable?
All federal student loans disbursed since July 1, 2006, have fixed interest rates that do not change over the life of the loan.
How can I find the interest rate on my specific federal student loan?
Log in to your account at studentaid.gov or contact your loan servicer to see the exact rate and balance for each loan you have.
Can I get a lower interest rate on my federal student loans?
You can receive a 0.25% rate reduction by enrolling in automatic payments through your servicer, but the base rate is set by law and cannot be negotiated.
