May 19, 2021

Interest Rates to Increase on New Federal Student Loans

Financial Education

 

Last week, the U.S. Treasury Department made its annual move that will impact the interest rates new student borrowers pay on Federal loans. For nearly a decade, the interest rates on federal student loans have been set each year according to the 10-year Treasury note rate, plus a fixed percentage that varies by loan type (e.g., subsidized Stafford, unsubsidized Stafford, PLUS).

The result of last week’s 10-year Treasury note auction by the U.S. Treasury Department will mean an increase of almost one percentage point in interest rates for federal student loans disbursed on or after July 1, 2021 and before July 1, 2022. The interest rates will be fixed for the life of the loan. The increase contrasts with last year’s change, which was about a two percent decrease and a new record low.

The new interest rates, along with a comparison of rates from the past four academic years, are listed below.

 

Loan Type

2021-22

2020-21

2019-20

2018-19

2017-18

Direct Subsidized (Undergraduate)

3.73%

2.75%

4.53%

5.05%

4.45%

Direct Unsubsidized (Undergraduate)

3.73%

2.75%

4.53%

5.05%

4.45%

Direct Unsubsidized (Graduate)

5.23%

4.30%

6.08%

6.60%

6.00%

Direct PLUS (Graduate and Parent)

6.28%

5.30%

7.08%

7.60%

7.00%