The new interest rates on federal student loans for 2026-27 school year are set to rise 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 12, 2026.

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 2026 - 2027

The new interest rates for 2026-27 federal student loans disbursed on or after July 1, 2025 will be:

• 6.52% for undergraduate Federal Direct Stafford Loans
• 8.07%for graduate Federal Direct Stafford Loans
• 9.07%for Federal Direct Grad PLUS Loans
• 9.07% for Federal Direct Parent PLUS Loans

That’s a increase of 0.13% 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 4.468% for the auction on May 12, 2026. Thus, the new interest rates are as follows:

• 6.518% for the Federal Direct Stafford Loan for undergraduate students, up from 6.392% 
• 8.068% for the Federal Direct Stafford Loan for graduate students, up from 7.942%
• 9.068% for the Federal Direct Grad PLUS Loan, up from 8.942%
• 9.068% for the Federal Direct Parent PLUS Loan, up from 8.942%

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 2.65% to 16.5% (fixed) and 3.03% to 18% (variable).

The interest rates for private refinance loans range from about 3.99% to 11% (fixed) and 3.65% to 11% (variable). 

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

Common Questions

How much does 0.57% rise increase costs over 10 years?

It will cost you about $0.64 per month for every $10,000 borrowed. So, over 10 years, that adds up to $76.84 for every $10,000 borrowed.

Should I prioritize federal over private loans with this rate increase?

You should always prioritize federal student loans over private loans, specifically because federal loans offer a variety of features like loan forgiveness, income driven repayment, and hardship options. Private loans don't offer those features.

Is refinancing federal loans advisable now?

It's rarely a good idea to refinance your federal loans. The only exception is if you don't qualify for loan forgiveness and don't take advantage of any income driven repayment plans or hardship options. Even then, you need to shop and compare private loan rates and see if they are lower - they may not be.

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Federal student loan interest rates are heading higher for the 2026-27 academic year, following Monday's May 10-year Treasury Note auction (PDF File). Undergraduate Stafford Loans will carry a 6.52% fixed rate, up from 6.392% a year earlier, with graduate and PLUS borrowers seeing similar increases of roughly 13 basis points.

The new rates apply to federal student loans disbursed on or after July 1, 2026, and remain fixed for the life of the loan.

The New Rates For 2026-27 Academic Year

The May 12 Treasury auction produced a high yield of 4.468%, which serves as the base for the federal student loan rate formula. Adding the statutory margin for each loan type produces the 2026-27 rates:

• Federal Direct Stafford Loan (Undergraduate): 6.52%
• Federal Direct Stafford Loan (Graduate): 8.07%
• Federal Direct Grad PLUS Loan: 9.07%
• Federal Direct Parent PLUS Loan: 9.07%

All four rates remain below their respective statutory caps of 8.25% for undergraduate Stafford, 9.50% for graduate Stafford, and 10.50% for PLUS loans.

It's important to remember that Grad PLUS Loans are only being issued to existing grandfathered-in students.

And these rates are very in-line with historical averages.

Year-Over-Year Change

Every loan type is moving up by about the same amount (roughly 0.13 percentage points) reflecting the modest rise in the May 10-year Treasury yield compared to last year's auction.

The change is small in isolation, but it compounds across a 10-year standard repayment plan and even more on extended or income-driven repayment timelines.

What This Means For Borrowers

For an undergraduate borrowing the full $5,500 annual limit at 6.52% on a 10-year standard repayment plan, total interest costs would run about $1,991 over the life of that single year's loan. 

Parent PLUS borrowers face the steepest absolute rate at 9.07%, along with the standard 4.228% origination fee that applies to PLUS disbursements, a combination that continues to make Parent PLUS one of the more expensive federal borrowing options.

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1. Abe℠ Student Loans - Abe offers private student loans to a undergraduate, graduate, and post-bachelor graduate certificate students, with flexible repayment options and no origination, late payment, or forbearance fees. Rates start as low as 2.65% APR. Read our full Abe Student Loans review.

2. Ascent - Ascent Student Loans is a solid choice as a private lender - as they offer both cosigner and non-cosigner loans for undergraduate and graduate students. Rates start as low as 2.69% APR. Read our full Ascent Student Loans Review.

3. College Ave - College Ave Student Loans offers some of the lowest fixed rates on student loans on the market today. They are one of the largest private student loan lenders, and have highly competitive rates on their loans. Rates start as low as 2.69% APR. Read our full College Ave Student Loans review.

4. Sallie Mae - Sallie Mae is probably one of the most well-known lenders on this list. They are the nation's largest private student loan lender by loan volume. As a result, they also offer some of the most competitive private student loans and parent loans out there. Rates start as low as 2.89% APR. Read our full Sallie Mae review.

5. Student Choice - Student Choice is a service that works with a huge network of credit unions nationwide to match you with low cost student loans offered by credit unions. They currently have some of the lowest variable rate student loans on the market. Rates start as low as 2.99% APR for fixed rates and 3.03% APR for variable rate loans. Read our full Student Choice Student Loans review.

Federal Loans: Remember, the federal student loan interest rates are fixed. They won't change again until the next academic year.

• Undergraduate Direct: 6.39%
• Graduate Direct: 7.94%
• Parent PLUS Loans: 8.94%

You can find a full list of the best private student loans here >>

Fixed vs. Variable Rates: Which Should You Choose?

There's a lot of uncertainty that borrowers don't like with variable rates, which can make sense, but in a declining rate environment, it also opens the potential for future savings. Here's what to know:

• Fixed rates stay the same for the life of the loan, offering predictable monthly payments. They’re better for borrowers who plan to repay over many years.
• Variable rates can change with market conditions, starting lower but carrying risk if the Fed raises rates again. They can make sense for borrowers who expect to pay off loans quickly.

Most private lenders allow you to check rates without affecting your credit score. Always compare both options before signing.

What To Know Before Borrowing

Before taking out a private student loan, make sure you understand exactly what you're signing up for.

• Cosigner rules: Most undergraduates need a cosigner - which is someone (usually a parent) that is just as legally responsible for the loan. Check for early cosigner release after consistent on-time payments.
• Repayment flexibility: Look for lenders offering in-school deferment, interest-only options, or income-based repayment.
• Discounts: Many lenders provide 0.25% off for autopay.
• Fees: Compared to federal loans, private loans offer fewer fees - including no origination fees.
• Safety: Federal loans offer loan forgiveness and income-driven repayment plans. Exhaust federal options before turning to private loans.

For most families, borrowing federal student loans first makes the most sense. However, for parents looking at parent PLUS vs. private loans, private loans can make more sense.

How We Track And Verify Student Loan Rates

At The College Investor, our editorial team reviews student loan rates daily from more than a dozen major lenders. We verify data using official lender disclosures, regulatory filings, and real-time rate sheets.

We only include lenders offering loans to U.S. citizens and permanent residents. All rates are updated regularly and represent the lowest available APRs with autopay discounts applied.

Our coverage is independent and not influenced by compensation. While we may earn a referral fee when you open a loan through certain links, this never affects our editorial recommendations. Our goal is simple: to help you find the most affordable path to borrow responsibly.

FAQs

How often do private student loan rates change?

Lenders can adjust daily based on bond market movements and Federal Reserve actions, as well as their own competitive goals.

Are private student loans fixed or variable?

You can choose either. Fixed rates offer stability, while variable rates change with the market.

Do private student loans qualify for forgiveness?

No. Only federal student loans are eligible for forgiveness programs like PSLF or IBR.

Is a cosigner always required?

Not always, but most undergraduate borrowers will need one to qualify.

Can I refinance later if rates drop?

Yes. Refinancing can reduce your rate and monthly payment, though you’ll lose federal benefits if you refinance federal loans.

South Carolina's Commission on Higher Education came up $25 million short on the money it needs to pay colleges for state-sponsored scholarships already awarded for the 2025-26 school year, according to reports from the South Carolina Daily Gazette. 

This miscalculation that lands less than three years after the same agency was caught sitting on a $152 million surplus. 

By The Numbers

• $301.9 million: What the agency projected it would need for LIFE, Palmetto Fellows, and SC HOPE scholarships this school year.
• $330 million: What it actually needed to pay colleges based on what it awarded.
• $25 million: The remaining gap after accounting for a $2.6 million reserve balance.
• 4,000: Additional South Carolina students who earned scholarships compared to last year, according to Executive Director Jeff Perez.
• $2,800 to $10,000: Award range, with the higher figure reserved for students pursuing math, science, education, and accounting degrees.

Why it matters: Students won't feel the shortfall directly as colleges already credited the scholarships against tuition at the start of the semester via the financial aid award. But colleges are now waiting on the back-end reimbursement, and state law requires that any gap between lottery profits and scholarship obligations be filled from the general fund. That means South Carolina taxpayers are on the hook, and lawmakers must pull money from other priorities as they finalize the budget for the year starting July 1.

What went wrong: According to reports, the agency is still in "analysis mode," but pointed to a mix of likely factors: higher enrollment, expanded eligibility after the Legislature added education and accounting majors to the enhanced scholarship tier in May 2024, and students keeping their grades up to retain awards longer than projected. State fiscal analysts had estimated the expanded eligibility alone would add $8.2 million in demand.

The flip side: In December 2023, an audit revealed the same agency had let $152 million in unspent lottery profits pile up over six years, which they blamed on a faulty algorithm that assumed scholarship demand would keep rising. The director at the time retired in the fallout, and the current director Jeff Perez took over in summer 2024. The Legislature spent $120 million of that surplus in 2024 on internship programs, school buses, medical residencies, and teacher bonuses.

What's next: House and Senate budget writers were notified this week and will have to find the $25 million inside ongoing spending negotiations. The episode also raises questions about the agency's projections for LIFE, Palmetto Fellows, and SC HOPE awards in the upcoming school year due to numbers already baked into both chambers' spending plans.

How This Connects: State-funded scholarships are one of the biggest tools for cutting college costs, and they vary widely from state to state. South Carolina's lottery-funded program is among the more generous, but the structural risk is the same everywhere: when projections miss, taxpayers or students pay.

For families weighing in-state vs. out-of-state options, programs like LIFE and Palmetto Fellows can swing the math by tens of thousands of dollars over four years,  making the stability of these funds a real consumer issue, not just a state-budget one.

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A new report from the U.S. Government Accountability Office (PDF File) finds that the redesigned Free Application for Federal Student Aid is doing what Congress intended — pushing more students into the Pell Grant program and qualifying far more of them for the maximum award. 

The report examined the first year of the simplified FAFSA and found significant gains in eligibility, with the largest jumps concentrated among middle-income households that historically received little or no need-based federal aid.

About 9.9 million students who completed the FAFSA were eligible for a Pell Grant in school year 2024–25, an increase of roughly 570,000 students, or 6% over the prior year.

Eligibility for the maximum Pell award of $7,395 grew even faster: about 7.9 million students qualified, a 31% increase representing roughly 1.9 million additional students.

The GAO attributes these results to the FUTURE Act of 2019 and the FAFSA Simplification Act of 2020, which together reshaped the application and the underlying aid formula.

Simpler Form Allows For Easier Completion 

The new FAFSA cut the number of questions from more than 100 to as few as 18 for some filers, automatically imported tax data from the IRS, and replaced the Expected Family Contribution with a new metric called the Student Aid Index. Congress also raised the income protection allowance, lifted the threshold for reporting assets from $50,000 to $60,000 in adjusted gross income, and created automatic Pell pathways tied to the federal poverty level.

Under the new rules, students whose household income falls at or below 175% or 225% of the federal poverty level (depending on dependency status and family size) automatically qualify for the maximum Pell. A second set of thresholds, ranging from 275% to 400% of poverty, automatically qualifies students for the minimum Pell. The minimum award rose to $740 in 2024–25.

The GAO also notes that incarcerated students are again eligible for Pell aid after a decades-long exclusion, and that students who are homeless or in foster care no longer have to reverify their status each year.

Middle Income Families Find Support

The headline finding for families: simplification did the most for households that previously felt squeezed out of need-based aid. We've long been advocates of always filling out the FAFSA, but FAFSA Simplification removed an additional barrier to making this happen.

At least 350,000 more students with household incomes between $60,001 and $125,000 became Pell-eligible in 2024–25 — accounting for at least 61% of the total 570,000-student increase. Within that band, the share of FAFSA filers who qualified rose from 38% to at least 55%.

The picture is even more striking for the maximum award. The number of students with household incomes between $40,001 and $80,000 who qualified for the full $7,395 Pell Grant more than doubled, from about 554,000 to at least 1.3 million. The GAO credits the expanded automatic maximum Pell criteria for much of this growth.

Lower-income students still make up the bulk of Pell recipients. Of the 9.9 million eligible students in 2024–25, about 7.4 million (roughly 75%) had household incomes below $60,001, and nearly all FAFSA filers in that bracket qualified.

What This Means For Households

For families weighing college affordability, there's a few key takeaways here.

Average awards moved up. The average Pell award across all eligible students rose by $278 from 2023–24 to 2024–25, driven largely by the surge in maximum-award qualifiers. Because more than half of eligible students qualify for the full amount in both years, the median award stayed at the full $7,395.

The asset rules changed. Roughly 2.4 million more students reported no assets on the 2024–25 FAFSA, partly because the threshold for reporting assets rose and partly because households below the automatic maximum Pell income criteria are not required to report assets at all. Among students who reported no assets, 91% were Pell-eligible and 85% qualified for the maximum.

The "sibling discount" went away, but most affected families gained anyway. The new formula no longer accounts for the number of family members in college, a feature that under the old formula reduced a student's expected contribution when a sibling was also enrolled. Despite that change, 60% of students with another family member in college qualified for Pell in 2024–25, up from 55%, and 77% of those qualified for the maximum, up from 48%. Other formula changes more than offset the loss for most households.

There are exceptions. The GAO modeled a hypothetical family of four with two children in college, $10,000 in assets, and $95,000 in household income — a family that may have qualified for a Pell Grant under the old rules but would not under the new ones. A similar family with $70,000 in income, however, would qualify for a larger award than before.

What Happens Next

The GAO is careful to note what the numbers do not capture. Fewer students completed the FAFSA in 2024–25 because of well-documented rollout delays, so eligibility totals are likely depressed relative to a normal cycle. The data also predates changes made under the One Big Beautiful Bill Act,  which restored small business and family farm asset exemptions on the 2026–27 FAFSA and could narrow Pell eligibility for some students with high household assets but low incomes.

It's important to remember, though, that the maximum Pell still covers less of the cost of college than it once did.

According to the Congressional Research Service, the maximum award covered about 80% of tuition, fees, and room and board at a public four-year college in the mid-1970s, around 40% in the early 1990s, and roughly 30% in 2022–23.

Larger eligibility numbers expand access but it does not, on its own, restore the award's historical buying power.

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