2025-26 Federal Student Loan Interest Rates: What Borrowers Actually Pay

Federal student loan interest rates are set by Congress each spring and fixed for the life of the loan based on the first disbursement date. For loans first disbursed between July 1, 2025 and June 30, 2026, the rates are:

For loans disbursed July 1, 2026 or later, rates shift slightly: undergrad 6.52%, graduate Unsubsidized 8.07%, and PLUS 9.07%.

Key Takeaway: Your rate is locked the day your loan is first disbursed and never changes — but each new loan you take gets that year's rate. A borrower with loans from several years will have several different fixed rates.

How Rates Are Set

Congress ties federal student loan rates to the 10-year Treasury note auction plus a fixed add-on:

• Undergrad (Subsidized & Unsubsidized): 10-year Treasury + 2.05%
• Graduate Unsubsidized: 10-year Treasury + 3.60%
• PLUS: 10-year Treasury + 4.60%

For 2025-26 the underlying Treasury index was about 4.34%, producing the rates shown above. The statutory caps (8.25% / 9.50% / 10.50%) protect borrowers if Treasury rates spike.

Origination Fees

Federal loans carry an origination fee deducted from each disbursement:

• Subsidized/Unsubsidized (undergrad & grad): 1.057%
• PLUS loans: 4.228%

This fee reduces the cash you receive but you repay the full principal. It is a real cost often overlooked when comparing to private loans.

Interest Accrues Daily

Federal student loan interest is simple interest calculated on the unpaid principal. The daily accrual is:

Daily Interest = Principal × (Annual Rate ÷ 365)

For a $10,000 loan at 6.39%, daily interest is about $1.75/day — roughly $53/month just in interest. On an Unsubsidized loan this accrues during school (see subsidized vs unsubsidized).

Fixed vs Variable: Why It Matters

Federal loans are always fixed. Private loans may be fixed or variable. A fixed federal rate protects you if market rates rise, but you cannot refinance downward within the federal program without giving up federal protections (see our refinance pros & cons).

Rates and Your Repayment Plan

Your rate directly drives your payment on the Standard plan and the total interest on any IDR plan. Use our amortization calculator to model payments at your exact rate and balance.

How Congress Sets Your Rate Each Spring

Federal student loan rates are not negotiated and do not depend on your credit. They are set by a formula in law, fixed for the life of each loan, and updated every year based on a spring Treasury auction.

The rate equals the high yield of the 10-year Treasury note at the May auction, plus a fixed "add-on" that varies by loan type:

• Direct Subsidized & Unsubsidized (undergrad): Treasury + 2.05%
• Direct Unsubsidized (graduate): Treasury + 3.60%
• Direct PLUS (grad & parent): Treasury + 4.60%

Rates are also capped: undergraduate loans at 8.25%, graduate loans at 9.5%, and PLUS loans at 10.5%. Those caps almost never bind because Treasury yields would have to spike dramatically. Once your loan is disbursed, its rate is locked — it never rises even if market rates climb later, which is a quiet advantage of federal debt over variable private loans.

This formula is why your rate is determined by when you borrowed, not by your credit score or income. Two students with identical loans borrow at different rates if they enrolled in different years. The add-ons and caps are written into 20 U.S.C. § 1077a and have been stable for years, so you can predict next year's rate once the May auction result is published by Federal Student Aid. For the payoff side of a given rate, use our amortization calculator.

Rate History: 2013–2026

Rates have drifted up and down with Treasury yields. A few reference points (undergraduate Direct loans):

Because each year's loans carry their own rate, a borrower who took loans across several years holds a blend of rates — which is why your amortization schedule reflects a weighted average, not a single number. The 2026–27 rates were published by Federal Student Aid in mid-2026. If you borrowed in a low-rate year (e.g., 2021–22 at 3.73%), that loan stays cheap for its whole life; if you borrowed in 2024–25 at 6.53%, it stays at that higher rate until paid off. This is exactly why extra payments targeted at your highest-rate loan save the most.

Fixed Rate vs. Refinancing Down

Your federal rate never increases, protecting you if market rates rise. But you cannot lower it inside the federal program — the only way to reduce the rate is a private refinance, which trades federal benefits for a (possibly) lower rate.

A private refinance can make sense once:

• Your income is stable and high enough that you no longer need IDR, deferment, or forbearance flexibility.
• You are not pursuing PSLF or IDR forgiveness.
• Your credit qualifies you for a rate below your blended federal rate.

Refinancing strips away federal protections, so it is usually a final step, not an early one. Use our refinance calculator to model the breakeven, and read the refinance pros & cons before signing. Keep federal loans while you still value the safety net. A good rule: refinance only the loans you are confident you will pay to zero on a private schedule, and keep at least one federal loan (or the whole set) if your income is variable, you work in public service, or you might need deferment or forbearance later.

Why Your Rate Differs From a Friend's

Because rates are set annually and fixed per loan, two borrowers with the same loan type can have different rates if they borrowed in different years. A 2023 disbursement might be ~5.5% while a 2025 disbursement is 6.39%. Within one borrower, a mix of years produces several rates — which is why your amortization schedule is really a blend. Our calculator weights each loan by balance to show the effective average.

Private loans, by contrast, are priced on your credit and the market at approval, so a high-credit borrower might beat the federal rate — but loses federal protections, fixed terms, and the income-driven safety net. The practical takeaway: your federal rate is a fact of when you borrowed, not who you are, and it will never change. If you hold older low-rate loans (e.g., 2021–22 at 3.73%), protect them; if you hold newer high-rate loans, prioritize them for extra payments or a strategic private refinance.

Fixed Rate vs. Refinancing Later

Your federal rate never rises, which protects you if market rates climb — a real advantage over variable private loans. But you cannot "refinance downward" inside the federal program; only a private refinance lowers it, and only by giving up IDR, PSLF, deferment, and forbearance. The usual advice: keep federal loans while you need flexibility (variable income, public-service plans, possible hardship), and refinance only once your career is stable and you have no use for federal safety nets.

Use our refinance calculator to model the breakeven: a private offer must beat your blended federal rate by enough to offset the lost protections and any fees. For most borrowers early in their career, the federal rate's stability and the IDR option are worth more than a point or two of interest. Revisit the decision as your income and family situation change, and read the refinance pros & cons before signing anything.

How to Find Your Exact Rate

You do not have to guess. Your exact rate is on (1) the promissory note you signed at disbursement, (2) your studentaid.gov "My Aid" page, and (3) your monthly servicer statement. Each loan may have a different rate if you borrowed across multiple years, so check per loan rather than assuming one number.

Why it matters: your amortization schedule and any extra-payment plan depend on the precise blended rate. If you later refinance, the private lender prices off your credit, not your federal rate — but knowing your federal rate tells you whether the refi offer is actually better. The 2026–27 federal rates (undergrad 6.52%, grad 8.07%, PLUS 9.07%) are published by Federal Student Aid each summer; if you borrowed in a prior year, your rate is locked at that earlier, possibly lower, figure. See the IDR guide for how rate interacts with income-driven payments.

Rate Caps and Why They Rarely Bind

Federal rates are capped by law so they cannot climb even if Treasury yields spike: undergraduate loans at 8.25%, graduate loans at 9.5%, and PLUS loans at 10.5%. These caps have not bound in recent decades because the 10-year Treasury add-on formula has stayed below the caps. The cap is a backstop, not a ceiling you will usually hit.

Because your rate is fixed at disbursement, the cap mainly matters for borrowers disbursing in a very high-rate year. The bigger planning lever is the rate you actually locked in, not the cap. If you hold older low-rate loans, protect them from consolidation (which blends and rounds up); if you hold newer high-rate loans, prioritize them for payoff or refinance. The rates history shows how the formula has moved over time.