Direct Loan Interest Rate Changes

August 20, 2013
Direct Loan Interest Rate Changes

Federal Student Loan interest rates have been reduced for the 2013-2014 academic year!

After negotiations between Congress and Senate, President Obama has signed the Bipartisan Student Loan Certainty Act of 2013.  This new law amends the Higher Education Act to provide new formulas for the determination of interest rates for all Direct Loan types.  The change is effective for loans first disbursed on or after July 1, 2013. 

Interest rates will now be established each year for Direct Subsidized, Unsubsidized and PLUS Loans.  The rate will be the sum of an index (high yield of the 10-year Treasury Note) plus an "add on". The amount of the "add on" varies based on the type of federal loan and the student's status.  The interest rate, once established, will apply for the life of the loan.

The rate also applies to Direct Consolidation Loans for applications received on or after July 1, 2013.  (Note the 8.25% cap has been removed from Consolidation Loans.)

Interest Rates for 2013-2014 Federal Direct Student Loans

Loan Type Student Grade Level 2013-2014 Fixed Interest Rate
Direct Subsidized Stafford Undergraduate 3.86%
Direct Unsubsidized Stafford

Undergraduate

Graduate/Professional

3.86%

5.41%

Direct PLUS Parents (of Dependent Undergraduates) and Graduate/Professional Students 6.41%
Direct Consolidation N/A New law removes the 8.25% cap. Rate remains the weighted avg. of the interest rates of the loans included in the consolidation, rounded up to the nearest one-eighth of one percent.