Federal Loan Interest Rate Changes

The Bipartisan Student Loan Certainty Act of 2013 was signed into law on August 9, 2013.  This Act changes the way interest rates on Federal Direct Subsidized, Unsubsidized, and Parent PLUS loans are determined.

Interest rates will now be established each year based on the 10-year Treasury Note Index plus an add on1.  The interest rate in effect for that year is fixed for the life of that loan.  As a result it is likely that many borrowers will have a set of fixed-rate loans, each with a different interest rate.  Interest is capped at 8.25% for Direct Subsidized and Unsubsidized Loans and 9.5% for Parent PLUS Loans.  The chart below shows the interest rates effective for the 2015-2016 academic year.

Federal Direct Loans 2015–16 Interest Rates

Loan Type 10-Year
Treasury Note
Add- On 2015–16 Fixed Interest Rate
Direct Subsidized 2.24% 2.05% 4.29%
Direct Unsubsidized 2.24% 2.05% 4.29%
Direct PLUS Loans 2.24% 4.6% 6.84%

1. The index rate is determined each year as the high yield of the 10-year Treasury note auctioned at the final auction held prior to the June 1 preceding the July 1 of the year for which the rate will be effective, plus a statutorily defined add-on.