The Department of Education has announced that federal student loan interest rates for the 2026-2027 academic year will decrease to 4.5 percent for undergraduate direct loans, down from 5.05 percent in the current year. Graduate loan rates will fall to 6.0 percent.
The rate reduction reflects declining yields on the 10-year Treasury note, which serves as the benchmark for federal student loan pricing. This marks the second consecutive year of rate decreases after the peak in 2024.
Financial aid experts encourage students to maximize federal borrowing before turning to private lenders, as federal loans offer income-driven repayment plans and potential forgiveness options that private loans do not.
