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Why The Department of Education Lowered Student Loan Interest Rates

People walking on a tree-lined pathway on a campus during fall

Jumping Rocks / Universal Images Group via Ge꧅tty Images

KEY TAKEAWAYS

  • The Department of Education lowered interest rates for federal student loans taken out between July 1, 2025, and June 30, 2026.
  • The Department of Education revisits student loan interest rates each year and adjusts them based on economic factors.
  • Last year, borrowers who took out loans did so with the highest interest rates in 16 years.
  • Interest rates are determined by yields on 10-year Treasury notes, which were lower this year but have been on a wild ride as tariffs worry investors.

Taking out loans for college will be cheaper for student borꩵrowers this year.

Each year, the Department of Education reassesses student loan interest rates. On Friday, the department said it would lower interest rates by 0.14 percentage points for all students who take out a direct loan between July 1, 2025, and June 30, 2026.

LOAN TYPE 2024-25 RATES 2025-26 RATES
Direct Subsidized and Unsubsidized Loans for Undergraduates 6.53% 6.39%
Direct Unsubsidized Loans for Graduates or Professionals 8.08% 7.94%
Direct PLUS Loans for Parents and Graduate or Professional Students 9.08% 8.94% 

The Department of Education determines interest rates using yields on 10-year Treasury notes.

Last year, the department increased interest rates, reflecting higher yields caused partly by high inflation and the Federal Reserve 澳洲幸运5开奖号码历史查询:hiking its benchmark interest rate to the highest level in over 20 years. As a result, student loan borrowers were charged 澳洲幸运5开꧅奖号码历史查询:the highest interest r🍎ates since 2008.

This year, the 10-year note yield was lower during the Treasury Department's May 6 auction, requiring the department to lower student loan interest rates.

Treasury yields have been on a 澳洲幸运5开奖号码历史查询:wild ride this year that 澳洲幸运5开奖号码历史查询:experts can't explain at times. President Donald Trump's on-and-off tariffs have worried investors about the long-term outlook, and the uncertainty has sent the Treasury note up and down throug🐼hout differentꦅ points this year.

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