Current Federal Student Loan Interest Rates (2026–27)
Rate Reference Guide
Key Facts: rates for loans first disbursed July 1, 2026 – June 30, 2027
- Undergraduate Direct Loans: 6.52% fixed
- Graduate Direct Loans: 8.07% fixed
- Parent/Grad PLUS Loans: 9.07% fixed
- Origination fees: 1.057% (Sub/Unsub) and 4.228% (PLUS), deducted before disbursement
- Up 0.13 points across the board after the one-year dip of 2025–26
- Rates are fixed for the life of each loan once disbursed; verify the current cycle at studentaid.gov
The 2026–27 rates went back up. I pulled the new table off studentaid.gov on the morning of August 9, 2026, and cross-checked it against the Treasury auction that sets it: the May 12 10-year note went off at a 4.468% high yield, add the statutory 2.05 points, and you get 6.518, which rounds to the 6.52% undergraduate rate the Department published. (Their own intro paragraph above the table still said "July 1, 2025," so read the table heading, not the text around it.) The one-year dip of 2025–26 is over: undergraduates now borrow at 6.52%, graduate students at 8.07%, PLUS borrowers at 9.07%, each up 0.13 points. With nearly $1.86 trillion in student loan debt outstanding across federal and private balances, per the Federal Reserve's August 7, 2026 G.19 release, small rate moves compound into real dollars over a ten-year term.
The most expensive student-loan mistake is often not a high rate but a refinance that forfeits federal benefits. A borrower working full-time for a qualifying nonprofit or government employer who refinances federal loans into a private loan for a fraction-of-a-point rate cut can surrender eligibility for Public Service Loan Forgiveness entirely. On a large balance pursued toward PSLF, the tax-free forgiveness given up can dwarf any interest the lower rate would have saved. Confirm your PSLF and income-driven-repayment standing before refinancing federal loans for a small rate reduction.
The fixed rate printed on your Master Promissory Note is also not quite the rate your balance effectively carries. Capitalized interest, unpaid interest added to principal at specific trigger events, makes the effective cost of an unsubsidized loan run higher than the printed 6.52% for a borrower who deferred payments through a four-year degree. A $27,000 loan disbursed across four undergraduate years at 6.52% accrues about $4,400 while you are enrolled, plus more through the grace period; all of it capitalizes at repayment start and then itself accrues interest for the next decade.
Private refinancing looks tempting at the advertised floors, but those rates go to the strongest applications, and lenders publish the floor rather than the profile behind it. Soft-check prequalification with several lenders shows you a realistic offer without denting your credit. And the trade is permanent; refinanced loans give up IDR, PSLF, Teacher Loan Forgiveness, deferment, forbearance, and the death and disability discharge.
How Federal Student Loan Rates Are Set
The Bipartisan Student Loan Certainty Act of 2013 tied the rate to one Treasury auction, and the formula has run unchanged since.
The 10-Year Treasury Note Formula
Each May the Treasury auctions the 10-year note. Whatever yield clears that auction becomes the baseline, and Congress's fixed margins go on top:
- Undergraduate Direct Loans: 10-year Treasury yield + 2.05 percentage points
- Graduate Direct Unsubsidized Loans: 10-year Treasury yield + 3.60 percentage points
- PLUS Loans (parent and graduate): 10-year Treasury yield + 4.60 percentage points
The resulting rate applies to all loans disbursed between July 1 of the current year and June 30 of the following year and stays fixed for the life of that loan. A loan disbursed in August 2026 keeps its 6.52% for good; last August's disbursements keep their 6.39%, whatever future auctions do.
Rate Caps Protect Borrowers
Congress also capped the formula: 8.25% undergraduate, 9.50% graduate, 10.50% PLUS. No auction has ever pushed a rate to its cap. For the undergraduate cap to bind, the May auction would have to clear at 6.20%, a level the 10-year note last saw around 2000.
Historical Federal Undergraduate Rates
| Academic Year | Undergrad Rate | Year-over-Year Change |
|---|---|---|
| 2020–2021 | 2.75% | — |
| 2021–2022 | 3.73% | +0.98% |
| 2022–2023 | 4.99% | +1.26% |
| 2023–2024 | 5.50% | +0.51% |
| 2024–2025 | 6.53% | +1.03% |
| 2025–2026 | 6.39% | −0.14% |
| 2026–2027 | 6.52% | +0.13% |
The 2025–26 dip turned out to be a one-year event, and 6.52% sits well above the roughly 4.8% average of the formula era that began in 2013. The climb from 2.75% to the mid-sixes since 2020 tracks the Federal Reserve's rate hikes against post-pandemic inflation, which pushed Treasury yields, and with them student loan rates, higher.
Loans price at each annual disbursement, so a four-year degree can put four different rates on one account, and the blended figure a servicer displays can match none of the Master Promissory Notes in the file, especially once undergraduate and PLUS balances merge at repayment. Read each loan's own line in the detail view before you make any refinancing call.
Federal vs. Private Rate Comparison
Federal rates depend on loan type and disbursement year, and every borrower in the cohort pays the same. Private rates are priced to the applicant.
| Loan Type | 2026–27 Rate | 2025–26 Rate | Change | Origination Fee |
|---|---|---|---|---|
| Direct Sub/Unsub (UG) | 6.52% | 6.39% | +0.13% | 1.057% |
| Direct Unsub (Grad) | 8.07% | 7.94% | +0.13% | 1.057% |
| Direct PLUS | 9.07% | 8.94% | +0.13% | 4.228% |
| Private (top credit) | Low single digits | Varies | — | None |
| Private (typical) | High single digits to mid-teens | Varies | — | None |
Federal loans also charge origination fees the rate columns do not show: a $10,000 Direct Loan delivers about $9,894 after the 1.057% fee, and a $20,000 PLUS Loan delivers $19,154 to the school after 4.228%. And the lowest advertised private rates go to the strongest applications; other applicants see offers from the high single digits to the mid-teens, above federal pricing and without the federal protections.
The federal rate also carries options that do not appear on a rate sheet: access to income-driven repayment, deferment and forbearance, and forgiveness programs that private loans do not offer. A private loan at 5% may appear cheaper than a federal loan at 6.52%, but if you later experience a job loss, health crisis, or income reduction, the federal loan's safety net could be worth far more than the rate difference. For a deeper look at private lending, see our private student loan guide.
How Interest Accrues: Subsidized vs. Unsubsidized
When interest starts accruing depends on which federal loan you hold, and the gap compounds for years.
Subsidized Loans: The Government Pays Your Interest
Direct Subsidized Loans go only to undergraduates with demonstrated financial need. The government pays the interest while you are enrolled at least half-time, through the six-month grace period, and during authorized deferments, so the balance you leave school with is the balance you borrowed.
Unsubsidized Loans: Interest Starts Immediately
Direct Unsubsidized Loans, open to undergraduates and graduates alike, start accruing the day the money moves. Skip the interest payments during school and the accrued amount eventually gets added to principal, a step called capitalization, after which you pay interest on the interest.
Worked Example: The Cost of Capitalization
Consider a student who borrows $27,000 in unsubsidized loans, disbursed at the start of each of four school years, all at 6.52% (one rate throughout, to keep the arithmetic visible):
- Interest accrued before repayment: each installment accrues from its own disbursement date, about $4,400 across the four enrolled years, and the six-month grace period adds roughly $880 on the full balance. Call it $5,300 by the time repayment begins, not the roughly $7,900 you would get by assuming the whole $27,000 was out from day one
- Balance at repayment start: after that interest capitalizes, the borrower owes roughly $32,300 instead of $27,000
- Monthly payment on $32,300 (10-year plan at 6.52%): approximately $367/month
- Total repaid: approximately $44,000 — meaning roughly $17,000 in total interest on an original $27,000 loan
Compare this to the same $27,000 in subsidized loans, where no interest accrues during school:
- Balance at repayment start: $27,000 (unchanged)
- Monthly payment (10-year plan at 6.52%): approximately $307/month
- Total repaid: approximately $36,825 — total interest of $9,825
Same principal, about $7,200 more repaid on the unsubsidized version, all of it born in the in-school and grace months. That gap is the case for filing the FAFSA and taking every subsidized dollar first.
Strategies to Minimize Interest Costs
You cannot pick your rate year, but you can shrink what the rate costs you.
1. Pay Interest During School
Even small payments on unsubsidized loans while enrolled prevent capitalization. On a $5,500 annual unsubsidized loan at 6.52%, the monthly interest is about $30. Paying just that amount each month keeps the balance from growing and saves hundreds over the loan's life.
2. Make Extra Payments Toward Principal
Any amount paid above your minimum monthly payment reduces the principal balance, which reduces the interest that accrues going forward. Even an extra $50 per month on a $27,000 loan at 6.52% saves close to $2,000 in interest and shortens repayment by almost two years. For detailed acceleration strategies, see our guide to paying off student loans fast.
3. Use Autopay for the 0.25% Discount
Federal Direct Loans carry a 0.25% interest rate reduction for automatic payments, and several private lenders offer the same. On a $27,000 balance, this saves roughly $400 over 10 years. It also eliminates the risk of missed payments that could damage your credit score.
4. Claim the Student Loan Interest Deduction
Borrowers can deduct up to $2,500 per year in student loan interest from their taxable income, regardless of whether they itemize deductions. The deduction phases out at a modified adjusted gross income (MAGI) of $85,000 for single filers and $175,000 for married filing jointly (2026 figures, inflation-indexed; verify in IRS Publication 970). For details, see our student loan tax deduction guide.
5. Consider Refinancing at the Right Time
If private rates sit well below your federal rate and you have no plans to use federal protections, refinancing cuts real interest cost.
Should You Refinance Your Student Loans?
When I re-verified refinance lenders for our comparison page on August 9, 2026, the lowest published fixed floors sat just under 4%, against 6.52% federal. That gap makes refinancing look attractive, but the decision is rarely as simple as comparing two numbers.
When Refinancing Makes Sense
- Rate savings of 1.5%+ are available: A rate at least 1.5 percentage points below your current federal rate saves roughly $2,500 to $4,500 on a $30,000 balance over 10 years, depending on the size of the cut
- You have stable, sufficient income: Without federal protections, you need confidence that you can make payments even during economic downturns
- You are not pursuing PSLF or IDR forgiveness: Refinancing into a private loan permanently disqualifies your loans from Public Service Loan Forgiveness and federal income-driven repayment plans
- You have no use for RAP: The Repayment Assistance Plan, live since July 1, 2026, bases payments on income with a $10 monthly minimum — and refinanced loans are not eligible for it
When to Keep Federal Loans
- You work in public service or plan to — PSLF forgives remaining balances after 120 qualifying payments, and that forgiveness is tax-free
- Your income is uncertain — federal loans offer income-driven repayment, and RAP's floor is a $10 minimum payment for the lowest-income borrowers
- You may need deferment or forbearance — federal loans provide these options during hardship; private lenders rarely offer comparable flexibility
- You have a high balance relative to income — if your loans exceed your annual salary, long-horizon IDR forgiveness (taxable since January 2026, but still valuable) may save more than refinancing
Break-Even Analysis
To decide, compare total costs. Take a 2025-26-vintage loan: $30,000 with 8 years remaining at 6.39% carries approximately $8,400 in remaining interest. Refinance to 4.5% private for the same 8-year term and the remaining interest drops to approximately $5,800, saving about $2,600. Those savings exclude the value of the federal options you surrendered. If there is any real chance you will need income-driven repayment, forbearance, or forgiveness, $2,600 in savings can cost tens of thousands in lost benefits. For today's verified lender figures, see our lender comparison page.
Frequently Asked Questions
What are the current federal student loan interest rates for 2026-27?
For loans first disbursed July 1, 2026 through June 30, 2027, the rates are 6.52% for Direct Subsidized and Unsubsidized Loans (undergraduate), 8.07% for Direct Unsubsidized Loans (graduate/professional), and 9.07% for Direct PLUS Loans. Each is 0.13 percentage points above the 2025-26 cycle, which had delivered the first decrease since 2020-21.
Are student loan interest rates fixed or variable?
Federal student loans disbursed since July 2006 carry fixed rates that never change after disbursement. A loan taken at 6.52% keeps that rate for its full term, whatever later cycles do. Private loans come fixed or variable; variable rates track market benchmarks and can move your payment quarter to quarter.
How is the federal student loan interest rate determined?
Since 2013 the formula has been the 10-year Treasury note yield from the May auction plus a margin Congress fixed: 2.05 points undergraduate, 3.60 graduate, 4.60 PLUS. The 2026-27 rates came off the May 12, 2026 auction's 4.468% high yield, and the result applies to all loans disbursed in the year starting July 1. Once set for a loan, the rate is permanent.
Should I refinance my student loans?
Refinancing makes sense when you can lock a rate well below your current one (1.5 points or more), your income is stable, and you have no plans to use income-driven repayment, deferment, or loan forgiveness. Moving federal loans to a private lender permanently ends access to income-driven repayment, PSLF, deferment, forbearance, and the death and disability discharge. Do not refinance while pursuing PSLF or IDR forgiveness.
What is interest capitalization on student loans?
Capitalization adds unpaid accrued interest to your principal, so future interest is charged on a bigger base. Common triggers include the end of a grace period, leaving deferment or forbearance, and missing an IDR income recertification. Paying interest before it capitalizes, even in small amounts during school, prevents the compounding.
Do I pay interest on student loans while in school?
With Direct Subsidized Loans the government covers interest while you are enrolled at least half-time and through the six-month grace period. Unsubsidized and PLUS loans accrue from the disbursement date, including while you are enrolled. Interest-only payments during school, often $25 to $50 a month per year's loan, stop the balance from growing.
How much interest will I pay on a $27,000 student loan?
On $27,000 at the 2026-27 undergraduate rate of 6.52%, the standard 10-year plan runs about $307 a month with roughly $9,825 in total interest, about $36,825 repaid in all. Stretching to 20 years lowers the payment but roughly doubles the interest. Payments applied to principal reduce the total.
What is the interest rate cap on federal student loans?
Congress capped the formula in 2013: 8.25% for undergraduate loans, 9.50% for graduate loans, and 10.50% for PLUS. No cap has been hit since the formula began. The 2026-27 rates still price on the 2013 margins; the May 12, 2026 auction's 4.468% plus 2.05 points comes to 6.518, which rounds to the published 6.52%.
Rates published here reflect the July 2026 – June 2027 academic cycle. Your exact rate is locked at disbursement and shown on your Master Promissory Note. Editorial and risk notice →
Primary sources for this page, all checked August 9, 2026: the rate table at Federal Student Aid — Interest Rates; the auction data behind it at TreasuryDirect; outstanding-balance figures from the Federal Reserve's G.19 Consumer Credit release; the OBBBA plan rules in the Federal Register final regulations of May 1, 2026; and deduction thresholds in IRS Publication 970.
Rates re-verified against studentaid.gov and the May 12, 2026 auction: August 9, 2026