The interest rates on federal student loans are fixed interest rates for the life of the loan. The interest rates on new federal student loans are set each July 1 based on the high yield of the last 10-year Treasury Note auction in May.
The new interest rates for 2023-24 federal student loans disbursed on or after July 1, 2023 will be:
- 5.498% for undergraduate Federal Direct Stafford Loans
- 7.048% for graduate Federal Direct Stafford Loans
- 8.048% for Federal Direct Grad PLUS Loans
- 8.048% for Federal Direct Parent PLUS Loans.
The half point interest rate increases continue a trend that began at the start of the pandemic, after interest rates reached a historic low.
The increases in federal student loan interest rates were influenced by the Federal Reserve Board’s attempts to control inflation by increasing interest rates. The Federal Reserve Board has increased interest rates by a total of 5 percentage points since March 2022.
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.
Interest Rate Formula For New Federal Student Loans
The interest rates are set based on a formula that adds a fixed margin based on the type of loan to the high yield from the 10-year Treasury Note auction. 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 3.448% for the auction on May 10, 2023. Thus, the new interest rates are as follows:
- 5.498% for the Federal Direct Stafford Loan for undergraduate students, up from 4.993%
- 7.048% for the Federal Direct Stafford Loan for graduate students, up from 6.543%
- 8.048% for the Federal Direct Grad PLUS Loan, up from 7.543%
- 8.048% for the Federal Direct Parent PLUS Loan, up from 7.543%
Prior Years' Interest Rates
This table shows how the interest rates has increased significantly during the pandemic.
Year | Federal Direct Stafford Loan (Undergraduate) | Federal Direct Stafford Loan (Graduate) | Federal Direct PLUS Loan (Graduate and Parent) |
|---|---|---|---|
2023-2024 | 5.498% | 7.048% | 8.048% |
2022-2023 | 4.993% | 6.543% | 7.543% |
2021-2022 | 3.734% | 5.284% | 6.284% |
2020-2021 | 2.750% | 4.300% | 5.300% |
Impact Of The Change In Interest Rates
The increase in interest rates yields an increase in the monthly student loan payment of about $2.50 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.
Let's start with the most common, undergraduate Direct Stafford student loans:
Year | Federal Direct Stafford Loan (Undergraduate) Interest Rate | Monthly Payment per $10,000 on 10-Year Term | Change vs. 2020-2021 |
|---|---|---|---|
2023-2024 | 5.498% | $108.52 | 13.7% |
2022-2023 | 4.993% | $106.03 | 11.1% |
2021-2022 | 3.734% | $99.99 | 4.8% |
2020-2021 | 2.750% | $95.41 | 0% |
Graduate Direct student loans have also seen a large change:
Year | Federal Direct Stafford Loan (Graduate) Interest Rate | Monthly Payment per $10,000 on 10-Year Term | Change vs. 2020-2021 |
|---|---|---|---|
2023-2024 | 7.048% | $116.36 | 13.3% |
2022-2023 | 6.543% | $113.77 | 10.8% |
2021-2022 | 5.284% | $107.46 | 4.7% |
2020-2021 | 4.30% | $102.68 | 0% |
Graduate PLUS Loans and Parent PLUS Loans have also seen a large rise in costs:
Year | Federal Direct PLUS Loan (Graduate and Parent) Interest Rate | Monthly Payment per $10,000 on 10-Year Term | Change vs. 2020-2021 |
|---|---|---|---|
2023-2024 | 8.048% | $121.58 | 13.1% |
2022-2023 | 7.543% | $118.93 | 10.6% |
2021-2022 | 6.284% | $112.45 | 4.6% |
2020-2021 | 5.30% | $107.54 | 0% |
Interaction With The Payment Pause And Interest Waiver
Interest rates on eligible federal student loans have been temporarily set at zero since March 2020. No new interest has accrued on federal student loans in the Direct Loan program and on FFELP loans held by or on behalf of the U.S. Department of Education.
Repayment is expected to restart on federal student loans in September 2023. Accordingly, the new federal student loans for the 2023-24 academic year may receive a month or two of waived interest, if they are disbursed in July or August, before the payment pause and interest waiver ends. Most of these loans, however, will be disbursed in September 2023 or later, and therefore not benefit from the interest waiver.
Related: Can The President Extend The Student Loan Payment Pause Forever?
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 15% (fixed) and 5.0% to 15% (variable).
The interest rates for private refinance loans range from about 4.5% to 12% (fixed) and 5.0% to 12% (variable).
Interest rates on private student loans typically change monthly. You can find the best student loan rates here.
Mark Kantrowitz is an expert on student financial aid, scholarships, 529 plans, and student loans. He has been quoted in more than 10,000 newspaper and magazine articles about college admissions and financial aid. Mark has written for the New York Times, Wall Street Journal, Washington Post, Reuters, USA Today, MarketWatch, Money Magazine, Forbes, Newsweek, and Time. You can find his work on Student Aid Policy here.
Mark is the author of five bestselling books about scholarships and financial aid and holds seven patents. Mark serves on the editorial board of the Journal of Student Financial Aid, the editorial advisory board of Bottom Line/Personal, and is a member of the board of trustees of the Center for Excellence in Education. He previously served as a member of the board of directors of the National Scholarship Providers Association. Mark has two Bachelor’s degrees in mathematics and philosophy from the Massachusetts Institute of Technology (MIT) and a Master’s degree in computer science from Carnegie Mellon University (CMU).
Editor: Robert Farrington Reviewed by: Chris Muller
