Student Loan Interest Rates for the 2026-27 School Year
Bad news in a world where it seems the cost of everything has gone up: the cost of student loans is going up, too.
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. This year's auction yielded 4.47%, up slightly from last year's 4.34%, so rates on 2026-27 loans will be modestly higher than the prior year.
The following rates are for loans issued between July 1, 2026, and June 30, 2027. 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.
1 | Loan type | Markup | 2026-27 Rate | 2025-26 Rate |
|---|---|---|---|---|
2 | Direct Undergraduate Loan | 2.05 | 6.52% | 6.39% |
3 | Parent PLUS Loan | 4.6 | 9.07% | 8.94% |
4 | Direct Graduate Loan | 3.6 | 8.07% | 7.94% |
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.
A note on changes to federal PLUS loans: The One Big Beautiful Bill Act, signed in July 2025, made significant changes to both Graduate and Parent PLUS loan programs. Beginning July 1, 2026, the Graduate PLUS loan program is being phased out entirely for new graduate students. Parent PLUS loans are still available, but are now subject to new annual and lifetime caps: $20,000 per year and $65,000 for the degree. For families who anticipated borrowing more than that through Parent PLUS, the gap will need to be filled with private loans — which come with fewer borrower protections and typically require a creditworthy co-signer. If you're a continuing student who borrowed a Graduate PLUS or Parent PLUS loan before that date, you can continue borrowing under a legacy provision for up to three more years or until you complete your current program.
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:
1 | Loan | Origination Fee | Accrued Interest at Graduation | Total Payments (10 years) | Total Cost (interest + fees) |
|---|---|---|---|---|---|
2 | Direct Undergraduate | $58 | $1,441 | $9,408 | $3,966 |
3 | Parent PLUS | $233 | $1,003 | $9,879 | $4,612 |
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. Note that the One Big Beautiful Bill Act reduced the number of available repayment plans for new borrowers starting July 1, 2026 — something worth factoring into your planning. 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.
