Federal Student Loan Interest Rates Set To Drop Slightly For 2025-2026

The new interest rates on federal student loans for 2025-26 school year are set to fall slightly.

The interest rates on federal student loans are fixed interest rates for the life of the loan. New interest rates apply to loans disbursed between July 1 and June 30.

The interest rates are based on the high yield of the last 10-year Treasury Note auction in May, which was on May 6, 2025.

The interest rates on the 10-year Treasury Note are influenced by a short-term interest rate called the Federal Funds Rate, which is set by the Federal Reserve Board. The Federal Reserve Board has been keeping this rate high in an attempt to control inflation, which remains stubbornly above the Federal Reserve Board’s 2% target. 

Interest rates on private student loans and on old fixed-rate federal student loans are not affected by the change in interest rates on new federal student loans. 

Student Loan Interest Rates For 2025 – 2026

The new interest rates for 2025-26 federal student loans disbursed on or after July 1, 2025 will be:

• 6.392% for undergraduate Federal Direct Stafford Loans
• 7.942%for graduate Federal Direct Stafford Loans
• 8.942%for Federal Direct Grad PLUS Loans
• 8.942% for Federal Direct Parent PLUS Loans

That’s a decrease of 0.141% compared with last year.

That’s not the smallest change in the interest rates. Aside from several years in which the interest rates did not change from the previous year (1997-98, 2007-08, 2012-13), interest rates dropped by 0.05% from 2003-04 to 2004-05. 

Previous Years’ Interest Rates

This table shows how the interest rates has increased significantly during the pandemic.

Interest Rate Formula For New Federal Student Loans

The interest rates on federal student loans are set based on a formula that adds a fixed margin based on the type of loan to the high yield from the last 10-year Treasury Note auction in May. The margins are as follows:

• High yield + 2.05% for the Federal Direct Stafford Loan for undergraduate students, capped at 8.25%
• High yield + 3.60% for the Federal Direct Stafford Loan for graduate students, capped at 9.50%
• High yield + 4.60% for the Federal Direct Grad PLUS Loan, capped at 10.50%
• High yield + 4.60% for the Federal Direct Parent PLUS Loan, capped at 10.50%

The high yield on the 10-year Treasury Note was 4.342% for the auction on May 6, 2025. Thus, the new interest rates are as follows:

• 6.392% for the Federal Direct Stafford Loan for undergraduate students, down from 6.533% 
• 7.942% for the Federal Direct Stafford Loan for graduate students, down from 8.083%
• 8.942% for the Federal Direct Grad PLUS Loan, down from 9.083%
• 8.942% for the Federal Direct Parent PLUS Loan, down from 9.083%

Impact Of Rising Interest Rates

The increase in interest rates yields a slight decrease in the monthly student loan payment of about $0.72 per month per $10,000 borrowed, assuming a 10-year repayment term, as compared with last year’s interest rates.

These tables show the impact of the change in interest rates on the monthly student loan payment for each type of federal education loan.

Here’s Undergraduate Direct Loans:

Current Interest Rates On Private Student Loans

The interest rates on private student loans depend on the type of loan and the credit score of the borrower (and cosigner, if any). They also depend on the repayment term. 

The interest rates for private student loans range from about 4.5% to 16.5% (fixed) and 5.5% to 18% (variable).

The interest rates for private refinance loans range from about 5% to 11% (fixed) and 5% to 11% (variable). 

Interest rates on private student loans typically change monthly. You can see a list of private loan lenders and rates here.

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