ES: Interest Rates on Federal Student Loans Jump to Decade Highs for 2024-2025 Year

Every May, interest rates on federal student loans are reset for the upcoming school year. The rates are calculated by combining the 10-year U.S. Treasury note yield with an extra fixed amount set by Congress.

Graduation mortar board cap on one hundred dollar bills concept for the cost of a college and university education

Based on this calculation, interest rates on federal student loans are set to increase for the 2024-2025 school year by more than 1%, the fourth straight year of increases. According to financial aid expert Mark Kantrowitz, the new rate for undergraduate Direct Loans is the highest in over a decade, while the new rates for graduate Direct Loans and graduate and parent PLUS Loans are at the highest level in more than 20 years. The rates apply to new federal student loans issued July 1, 2024, through June 30, 2025, and the interest rate is fixed for the life of the loan.

Ongoing inflationary pressures have played a part in the higher rates, similar to last year. The federal funds rate set by the Federal Open Market Committee of the Federal Reserve directly influences the yield on the 10-year Treasury note, which in turn influences the interest rate on federal student loans.

2024-20252023-2024Available toBorrowing limitsDirect Loans:
Undergraduate
Students
(Subsidized and
Unsubsidized)6.53%5.50%Undergraduate students
only
Subsidized loans require
financial need as
determined by the
FAFSA (Free Application
for Federal Student Aid)
Unsubsidized loans are
available to any student,
regardless of financial
needFor dependent undergraduates:
1st year: $5,500 (max $3,500
subsidized)
2nd year: $6,500 (max $4,500
subsidized)
3rd, 4th, 5th year: $7,500 (max
$5,500 subsidized)
Max: $31,000 (max $23,000
subsidized)Direct Loans:
Graduate
Students
(Unsubsidized
only)8.08%7.05%Graduate and
professional students
All students are eligible
regardless of financial
need$20,500 per year; max $138,500PLUS Loans:
Parents and
Graduate
Students
(Unsubsidized
only)9.08%8.05%Parents of dependent
undergraduate students
and graduate and
professional studentsTotal cost of education, minus
any other aid received by the student
or parent

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