The interest rates for federal student loans for the academic year 2024-25 have seen a significant increase of over one percentage point. These rates, which are fixed for the duration of the loan, are applicable to loans disbursed from July 1, 2024, to June 30, 2025.
The adjustment in rates is derived from the high yield of the 10-year Treasury Note auction that took place on May 8, 2024. The yield of this auction plays a crucial role, as it sets the benchmark for the following year’s student loan rates. The Federal Reserve Board influences these yields through the Federal Funds Rate, which it has maintained at high levels to combat persistent inflation above its 2% target.
Student and Plus Loan Interest Rates For 2024 – 2025
The updated rates for various types of federal student loans disbursed from July 1, 2024, are as follows:
- 6.533% for undergraduate Federal Direct Stafford Loans
- 8.083% for graduate Federal Direct Stafford Loans
- 9.083% for both Federal Direct Grad PLUS and Parent PLUS Loans
This represents an increase of 1.035% from the previous year and a substantial rise of 3.783% from the record low during the 2020-21 pandemic period.
Consequently, the increased interest rates will affect the monthly repayment amounts for new borrowers. For instance, for every $10,000 borrowed, the monthly payment for undergraduate direct loans will increase by approximately $5.20 to $5.54, based on a 10-year repayment plan.
In addition to interest rates, Federal Direct loan borrowers also pay an origination fee, which is significantly higher for PLUS Loans compared to Stafford Loans. The origination fee for PLUS Loans is approximately 4.2%, four times the fee for Stafford Loans. These fees are based on the rates in effect at the time of the loan’s disbursement and are typically deducted proportionately from each disbursement. Plus borrowers have the option to include these fees in their loan balance.
Interest Rates of Federal Student Loans: Academic Year 2024 - 2025
| Loan | Borrower | Interest Rate | Origination Rate |
|---|---|---|---|
| Federal Direct Stafford Loan | Undergraduate Student | 6.533% | 1.057% |
| Federal Direct Stafford Loan | Graduate Student | 8.083% | 1.057% |
| Federal Direct Grad PLUS Loan | Graduate Student | 9.083% | 4.228% |
| Federal Direct Parent PLUS Loan | Parent of Undergraduate Student | 9.083% | 4.288% |
How Federal Student Loan Interest Rates are Determined
The formula for determining the interest rates involves adding a fixed margin to the high yield from the May auction of the 10-year Treasury Note. These margins vary by loan type and are capped at a maximum rate:
- The margin for undergraduate Stafford Loans is 2.05%, with a cap at 8.25%.
- For graduate Stafford Loans, the margin is 3.60%, capped at 9.50%.
For Federal PLUS Loans, which include both Parent PLUS Loans for parents of undergraduate students and Grad PLUS Loans for graduate students, the interest rates are fixed but recalibrated annually on July 1 based on the last 10-year Treasury Note auction. The formula for these loans is as follows:
- The rate is the 10-year Treasury Note yield plus 4.6%, capped at 10.5%
Historical Interest Rates on Federal Stafford Loans
To provide historical context, here are the interest rates for subsidized and unsubsidized Federal Direct Student Loans over the past 18 years:
Historical Interest Rates of Federal Stafford Loans to Undergraduate Students : 2006 - 2024
| Academic Year | Subsidized | Unsubsidized |
|---|---|---|
| 2023-2024 | 5.50% | 5.50% |
| 2022-2023 | 4.99% | 4.99% |
| 2021-2022 | 3.73% | 3.73% |
| 2020-2021 | 2.750% | 2.750% |
| 2019-2020 | 4.529% | 4.529% |
| 2018-2019 | 5.045% | 5.045% |
| 2017-2018 | 4.45% | 4.45% |
| 2016-2017 | 3.76% | 3.76% |
| 2015-2016 | 4.29% | 4.29% |
| 2014-2015 | 4.66% | 4.66% |
| 2013-2014 | 3.86% | 3.86% |
| 2012-2013 | 3.40% | 6.80% |
| 2011-2012 | 3.40% | 6.80% |
| 2010-2011 | 4.50% | 6.80% |
| 2009-2010 | 5.60% | 6.80% |
| 2008-2009 | 6.00% | 6.80% |
| 2007-2008 | 6.80% | 6.80% |
| 2006-2007 | 6.80% | 6.80% |
Historical Interest Rates on Federal PLUS Loans
Regarding the historical rates of Parent PLUS Loans, the rate for the 2024-25 academic year is the highest in the past 18 years, as indicated by the following history of interest rates:
Historical Interest Rates of Federal Parent Plus Loans: 2006 - 2024
| Academic Year | Direct | FFEL |
|---|---|---|
| 2023-2024 | 8.05% | |
| 2022-2023 | 7.54% | |
| 2021-2022 | 6.28% | |
| 2020-2021 | 5.30% | |
| 2019-2020 | 7.079% | |
| 2018-2019 | 7.595% | |
| 2017-2018 | 7.00% | |
| 2016-2017 | 6.31% | |
| 2015-2016 | 6.84% | |
| 2014-2015 | 7.21% | |
| 2013-2014 | 6.41% | |
| 2012-2013 | 7.90% | |
| 2011-2012 | 7.90% | |
| 2010-2011 | 7.90% | |
| 2009-2010 | 7.90% | 8.50% |
| 2008-2009 | 7.90% | 8.50% |
| 2007-2008 | 7.90% | 8.50% |
| 2006-2007 | 7.90% | 8.50% |
