Every year, federal student loan interest rates on new federal student loans are reset by Congress for the upcoming academic year. For the first time in three years, interest rates will decrease in 2019-2020 for borrowers. The lower rates apply only to new federal student loans disbursed between July 1, 2019, and June 30, 2020 and include Direct:
- Stafford Loans for Undergraduates (subsidized or unsubsidized) — 4.53% (5.05% for 2018-2019)
- PLUS Loans for Parents and Graduate Students — 7.08% (7.6% for 2018-2019)
- Stafford Loans for Graduate Students (unsubsidized only) — 6.08% (6.6% for 2018-2019)
Subsidized vs. unsubsidized
What’s the difference? With subsidized loans, the federal government pays the interest that accrues while the student is in school, during the six-month grace period after graduation, and during any loan deferment periods. Subsidized loans are based on financial need. With unsubsidized loans, the borrower is responsible for paying the interest during these periods. Only undergraduate students are eligible for subsidized loans, and eligibility is based on demonstrated financial need.
Detail for the Federal Student Loan Interest Rates
| New rate 2019-2020 | Old rate 2018-2019 | Available to | Borrowing limits | |
|---|---|---|---|---|
|
Direct Stafford Loans: Undergraduates (Subsidized) |
4.53% |
5.05% |
Undergraduate students only Subsidized loans are based on financial need as determined by the federal aid application (FAFSA) |
For 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 Stafford Loans: Undergraduates (Unsubsidized) |
4.53% |
5.05% |
Undergraduate students only; all students are eligible regardless of financial need |
For 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 Stafford Loans: Graduate or Professional Students |
6.08% |
6.6% |
Graduate or professional students only; all students are eligible regardless of financial need Unsubsidized loans only |
$20,500 per year; max $138,500 |
|
Direct PLUS Loans: Parents and Graduate or Professional Students |
7.08% |
7.6% |
Parents of dependent undergraduate students and graduate or professional students Unsubsidized loans only |
Total cost of education, minus any other aid received by student or parent |
Food for Thought
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