Interest rates are going up again for new Federal Direct Student Loans beginning on July 1, 2018.

Interest rates for Direct Loans are based on a formula whereby the rates are indexed to the 10-Year Treasury Note plus an “add-on” percentage. This year’s auction of the 10-year Treasury note resulted in a “high yield” of 2.995%, an increase over last year’s high yield of 2.400%. As a result, borrowers with new loans for the 2018-2019 award year will be paying more in finance charges over the life of their loan. You can read all about it here in a recent electronic announcement from FSA. Don’t forget to update your borrower communications and consumer information!

Interest Rates for Direct Loans First Disbursed Between July 1, 2018 and June 30, 2019

Undergraduate Students
Direct Subsidized Loan                5.05%
Direct Unsubsidized Loans           5.05%
Direct PLUS Loans                      7.60%

Graduate & Professional Students
Direct Unsubsidized Loans           6.60%
Direct PLUS Loans                      7.60%

For each loan type, the calculated interest rate may not exceed a maximum rate specified in the HEA. The maximum interest rates are 8.25% for Direct Subsidized Loans and Direct Unsubsidized Loans made to undergraduate students, 9.50% for Direct Unsubsidized Loans made to graduate and professional students, and 10.50% for Direct PLUS Loans made to parents of dependent undergraduate students or to graduate or professional students.