Do You Know about Interest rate on federal student loans?

If you receive a federal student loan, you will be required to repay that loan with interest. It is important that you understand how interest is calculated and the fees associated with your loan. Both of these factors will impact the amount you will be required to repay.


What is interest?

Interest is money paid to the lender in exchange for borrowing money. Interest is calculated as a percentage of the unpaid principal amount (loan amount) borrowed.


What are the interest rates for federal student loans?

The interest rate varies depending on the loan type and (for most types of federal student loans) the first disbursement date of the loan. The table below provides interest rates for Direct Loans first disbursed on or after July 1, 2016.
Perkins Loans (regardless of the first disbursement date) have a fixed interest rate of 5%.
Interest Rates for Direct Loans First Disbursed on or After July 1, 2016
Loan TypeBorrower TypeLoans first disbursed on or after 7/1/16 and before 7/1/17
Direct Subsidized LoansUndergraduate3.76%
Direct Unsubsidized LoansUndergraduate3.76%
Direct Unsubsidized LoansGraduate or Professional5.31%
Direct PLUS LoansParents and Graduate or Professional Students6.31%
All interest rates shown in the chart above are fixed rates for the life of the loan.
Note: The interest rates for federal student loans are determined by federal law. If there are future changes to federal law that affect federal student loan interest rates, we will update this page to reflect those changes.

Who sets interest rates for federal student loans?

Interest rates on federal student loans are set by Congress.


How is interest calculated?

The amount of interest that accrues (accumulates) on your loan from month to month is determined by a simple daily interest formula. This formula consists of multiplying your loan balance by the number of days since the last payment times the interest rate factor.
Simple daily interest formula:
Outstanding principal balance
x number of days since last payment
x interest rate factor
= interest amount


What is the interest rate factor?

The interest rate factor is used to calculate the amount of interest that accrues on your loan. It is determined by dividing your loan's interest rate by the number of days in the year.


How can I determine how much of my payment will go toward my outstanding principal balance?

Your loan servicer can tell you how much of your payment is applied to your principal balance. 

Are there any other fees for federal student loans?

Most federal student loans have loan fees that are a percentage of the total loan amount. The loan fee is deducted proportionately from each loan disbursement you receive. This means the money you receive will be less than the amount you actually borrow. You're responsible for repaying the entire amount you borrowed and not just the amount you received.
The chart below shows the loan fees for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after Oct. 1, 2014.
Loan TypeFirst Disbursement DateLoan Fee
Direct Subsidized Loans and Direct Unsubsidized LoansOn or after 10/1/15 and before 10/1/161.068%
On or after 10/1/16 and before 10/1/171.069%
Direct PLUS LoansOn or after 10/1/15 and before 10/1/164.272%
On or after 10/1/16 and before 10/1/174.276%
Loans first disbursed prior to Oct. 1, 2015, have different loan fees.
There are no loan fees for Perkins Loans.


What are the interest rates on federal student loans first disbursed before July 1, 2016?

The following table provides interest rates for Direct Loans and Federal Family Education Loan (FFEL) Program loans** first disbursed on or after July 1, 2006, and before July 1, 2016.
Perkins Loans (regardless of the first disbursement date) have a fixed interest rate of 5%.
Loan TypeBorrower TypeFirst Disbursement DateFixed Interest Rate
 
Direct Subsidized Loans*











  Undergraduate7/1/15–6/30/164.29%
7/1/14–6/30/154.66%
7/1/13–6/30/143.86%
7/1/11–6/30/133.4%
7/1/10–6/30/114.5%
7/1/09–6/30/105.6%
7/1/08–6/30/096.0%
7/1/06–6/30/086.8%
Graduate or Professional7/1/06–6/30/126.8%
Subsidized Federal Stafford Loans**Undergraduate7/1/09–6/30/105.6%
7/1/08–6/30/096.0%
7/1/06–6/30/086.8%
Graduate or Professional7/1/06–6/30/106.8%
Direct Unsubsidized Loans

 Undergraduate7/1/15–6/30/164.29%
7/1/14–6/30/154.66%
7/1/13–6/30/143.86%
Graduate or Professional7/1/15–6/30/165.84%
7/1/14–6/30/156.21%
7/1/13–6/30/145.41%
Undergraduate and Graduate or Professional7/1/06–6/30/136.8%
Unsubsidized Federal Stafford Loans**Undergraduate and Graduate or Professional7/1/06–6/30/106.8%


Direct PLUS Loans

Parents and Graduate or Professional7/1/15–6/30/166.84%
7/1/14–6/30/157.21%
7/1/13–6/30/146.41%
7/1/06–6/30/137.9%
Federal PLUS Loans**Parents and Graduate or Professional7/1/06–6/30/108.5%
*As of July 1, 2012, graduate or professional students are no longer eligible to receive subsidized loans.
**No new FFEL Program loans have been made since July 1, 2010.
Most loans (excluding Perkins Loans) first disbursed prior to July 1, 2006, have variable interest rates that are effective from July 1 of one year through June 30 of the following year. Interest rates for these loans are not displayed on this site.
Do You Know about Interest rate on federal student loans? Do You Know about Interest rate on federal student loans? Reviewed by Kelly Miller on August 12, 2016 Rating: 5

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