Student Loan Interest Rates for the 2025-26 School Year
Student loan interest rates are set annually based on the May Treasury auction. With this year's auction behind us, we now know what the rates on this year's student loans will be. Each loan type has a set markup from the 10-year Treasury yield. In a departure from recent years, this year's rate--4.34%-- was down slightly from previous years, so this year's student loans will have slightly lower rates than the previous year's.
The following rates are for loans issued between July 1, 2025, and June 30, 2026. Federal student loans have fixed interest rates, so a loan taken out this year will have the below interest rate until it's paid off. It will not change the rate on any previous student loan you've taken out.
| Loan Type | Markup | 2025-26 Rate | 2024-25 Rate |
|---|---|---|---|
| Direct Undergraduate Loan | 2.05 | 6.39% | 6.53% |
| Parent PLUS Loan | 4.6 | 8.94% | 9.08% |
| Direct Graduate Loan | 3.6 | 7.94% | 8.08% |
In addition to interest rates, federal loans have fees for disbursement: 1.057% of the loan for direct undergraduate or graduate loans and 4.228% for PLUS loans.
Currently, undergraduates can borrow a maximum of $27,000 over four years, broken out as follows:
First year: $5,500
Second year: $6,500
Third and fourth years: $7,500
These low annual limits, combined with the much higher costs of Parent PLUS loans, mean that students who will need to borrow at some point during their college careers should plan to borrow the direct student loan every year. Unused amounts do not carry forward-- if you don't borrow the available $5,500 your first year, you can't add that to a subsequent year's borrowing. And the much higher costs of Parent PLUS loans means you'll end up spending more on them, even if you delay borrowing.
Here's a comparison of borrowing $5,500 in the student's first year with the direct undergraduate loan versus borrowing it in their third year with a Parent PLUS loan:
| Loan | Origination Fee | Accrued Interest at Graduation | Total Payments (10 years) | Total Cost (interest + fees) |
|---|---|---|---|---|
| Direct Undergraduate | $58 | $1,406 | $9,370 | $3,928 |
| Parent PLUS | $233 | $983 | $9,833 | $4,566 |
The above assumes the student loan is unsubsidized; were it subsidized (where no interest accrues on a portion of the loan during the college years and the six month grace period following graduation) the savings would be even more substantial.
Despite the high interest rates, federal student loans are almost always a student's-- and family's-- best starting point. That's because federal loans have far stronger borrower protections than do private loans: income-driven repayment plans, forgiveness programs, and more. In addition, it's unlikely that a student could qualify for the best interest rates on private loans without a parent co-signer, which makes the parent equally responsible for the loan balance. Finally, while federal loans can always be refinanced into private loans should better terms become available, the same is not true of private loans: once private loans are taken out, borrowers have no option to refinance
