Key insights
- Federal student loan interest rates are increasing for the 2026-27 academic year, driven by higher 10-year Treasury yields influenced by inflation and Federal Reserve policy. This rise, coupled with changes to Parent PLUS and Grad PLUS loan programs and potential restrictions based on major, could tighten credit availability for students and graduates. While not at historic highs, the trend reflects broader economic conditions and could indirectly impact consumer spending and economic growth.
%3Amax_bytes(150000)%3Astrip_icc()%2FGettyImages-2270066270-5621f32f2f6f46b78288cc1fbd243fba.jpg&w=3840&q=75)
Get personalized, AI-powered answers built on 27+ years of trusted expertise.
Interest rates on federal student loans are rising once again this year.
Undergraduates with student loans disbursed during the 2026-27 academic year will face a 6.52% interest rate on any direct subsidized or unsubsidized loans, the Department of Education announced last week.1 That's a slight increase from the interest rates for the previous academic year.
Interest rates are even higher for loans for graduate students and parents.
The Department of Education uses the yields on 10-year Treasury notes to determine annual interest rate changes. This year, yields rose in part due to inflation reaching its highest level in almost three years and the Federal Reserve keeping interest rates elevated to fight it.
Although 2026-27 interest rates rose from the previous academic year, they are not at a historic high. Interest rates in 2024-25 were slightly higher, and rates in 2008 remain the highest on record.2
Interest rates aren't the only significant change students can expect this year. Significant student loan changes from the "One Big, Beautiful Bill" will take effect on July 1.
Families who have never borrowed a Parent PLUS loan will have a smaller loan limit, and graduate students who have never borrowed a Grad PLUS loan will be cut off completely from the loan program. Existing borrowers will have the same access to PLUS loans as they did in prior years.
In addition, the Department of Education is allowing colleges to restrict the amount of loans available to students based on their major for the first time.
Get personalized, AI-powered answers built on 27+ years of trusted expertise.