May 13, 2020

Federal Student Loan Interest Rates for 2020-21 Fall to New Record Lows

Financial Education

 

Amid the harsh economic fallout caused by the COVID-19 outbreak, interest rates on new federal student loans will drop by nearly 40 percent during the upcoming academic year, according to bellwether information released yesterday by the Treasury Department.

Since 2013, interest rates on federal student loans have been set annually according to the 10-year Treasury note rate, plus a fixed percentage that differs by loan type (e.g., subsidized Stafford, unsubsidized Stafford, PLUS). On May 12, 2020, the U.S. Treasury’s 10-year Treasury note auction resulted in a yield of .7 percent – a decrease of nearly two percentage points from a year prior and a new record low for interest rates on federal student loans. The updated rates will apply to federal student loans disbursed between July 1, 2020 and June 30, 2021 and will be fixed for the life of the loan.

The new interest rates, along with a comparison of rates from the past three academic years, are listed below. Please note that the interest rates of all federal student loans are currently frozen at zero until September 30, 2020, because of provisions contained in the CARES Act which provide temporary economic relief to student borrowers.

 

Loan Type

2020-21

2019-20

2018-19

2017-18

Direct Subsidized (Undergraduate)

2.75%

4.53%

5.05%

4.45%

Direct Unsubsidized (Undergraduate)

2.75%

4.53%

5.05%

4.45%

Direct Unsubsidized (Graduate)

4.30%

6.08%

6.60%

6.00%

Direct PLUS (Graduate and Parent)

5.30%

7.08%

7.60%

7.00%