Direct Loan interest rates jumped for the first time in several years. Direct Loan interest rates have been trending downward over the last few years but it was only a few short years ago that Subsidized and Unsubsidized Direct Loans carried a fixed interest rate of more than 4%. All things considered, the new interest rate, although an increase from last year’s rates is still close to historic lows. The Federal Direct Loan Program is still a winner for students with lower interest rates and more favorable repayment terms than loans from private lenders.
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 2.400%, thus the reason or the spike. You can read all about it here in a recent Electronic Announcement from Federal Student Aid.
The Interest Rates for loans where the first disbursement is made on or after July 1, 2017, and before June 30, 2018 are:
Undergraduate Students
- Direct Subsidized loans 4.45%
- Direct Unsubsidized Loans 4.45%
- Direct PLUS Loans (All Borrowers) 7.00%
Graduate/Professional Students
- Direct Unsubsidized Loans 6.00%
- Direct PLUS Loans (All Borrowers) 7.00%
This post first appeared in our July 2017 Newsletter. Click the link below to sign up.