Each May, the interest rates for federal student loans are recalculated for the new academic year, based on the sum of the 10-year U.S. Treasury note yield and a fixed margin determined by Congress.
For the 2024-2025 academic year, federal student loan interest rates are anticipated to rise by more than 1%, marking the fourth consecutive year of increases. Financial aid specialist Mark Kantrowitz notes that the upcoming rates for undergraduate Direct Loans will be the highest seen in over ten years. Additionally, rates for graduate Direct Loans and for both graduate and parent PLUS Loans will hit a 20-year peak. These rates will apply to new federal student loans disbursed from July 1, 2024, to June 30, 2025, and will remain fixed throughout the loan’s duration.
This surge in rates is partly due to ongoing inflationary trends that have continued to affect the economy, similar to the previous year. The federal funds rate, set by the Federal Open Market Committee of the Federal Reserve, impacts the yield on the 10-year Treasury note, which in turn affects federal student loan interest rates.
2024-2025 Interest Rates and Borrowing Limits:
| 2024-2025 | 2023-2024 | Available to | Borrowing limits | |
| Direct Loans: | 6.53% | 5.50% | Undergraduate students only | For dependent undergraduates: |
| Undergraduate Students | 1st year: $5,500 (max $3,500 subsidized) | |||
| (Subsidized and Unsubsidized) | Subsidized loans require financial need as determined by the FAFSA (Free Application for Federal Student Aid) | 2nd year: $6,500 (max $4,500 subsidized) | ||
| 3rd, 4th, 5th year: $7,500 (max $5,500 subsidized) | ||||
| Unsubsidized loans are available to any student, regardless of financial need | Max: $31,000 (max $23,000 subsidized) | |||
| Direct Loans: | 8.08% | 7.05% | Graduate and professional students | $20,500 per year; max $138,500 |
| Graduate Students | All students are eligible regardless of financial need | |||
| (Unsubsidized only) | ||||
| PLUS Loans: | 9.08% | 8.05% | Parents of dependent undergraduate students and graduate and professional students | Total cost of education, minus any other aid received by student or parent |
| Parents and Graduate Students | ||||
| (Unsubsidized only) |
These changes reflect the evolving economic landscape and underscore the importance of considering the long-term financial commitments involved in funding higher education.