Understand how interest is calculated and what fees are associated with your federal student loan.

Remember that interest rates and fees are generally lower for federal student loans than private student loans.

Interest Rates and Fees

If you receive a federal student loan, you will be required to repay that loan with interest. It is important that you understand how interest is calculated and the fees associated with your loan. Both of these factors will impact the amount you will be required to repay. 

What are the interest rates for federal student loans?
What is interest?
How is interest calculated?
  What is the interest rate factor?
What is capitalization and how does it relate to interest?
Who sets interest rates for federal student loans?
How can I determine how much of my payment will go toward my outstanding principal balance?
Are there any fees for federal student loans?
What are the interest rates on federal student loans first disbursed before July 1, 2018?


What are the interest rates for federal student loans?

The interest rate varies depending on the loan type and (for most types of federal student loans) the first disbursement date of the loan. The table below provides interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after July 1, 2018, and before July 1, 2019.

Perkins Loans (regardless of the first disbursement date) have a fixed interest rate of 5%.

Interest Rates for Direct Loans First Disbursed on or After July 1, 2018, and Before July 1, 2019

Loan Type

Borrower Type

Fixed Interest Rate

Direct Subsidized Loans and Direct Unsubsidized Loans

Undergraduate

5.05%

Direct Unsubsidized Loans

Graduate or Professional

6.6%

Direct PLUS Loans

Parents and Graduate or Professional Students

7.6%

All interest rates shown in the chart above are fixed rates that will not change for the life of the loan.

View the interest rates on federal student loans first disbursed before July 1, 2018.

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What is interest?

Interest is paid to a lender as a cost of borrowing money. Interest is calculated as a percentage of the unpaid principal amount. Unlike other forms of debt, such as credit cards and mortgages, Direct Loans are daily interest loans, which means that interest accrues (accumulates) daily. Depending on whether your loans are subsidized or unsubsidized, you may or may not be responsible for paying the interest that accrues during all periods. Learn about the differences between subsidized loans and unsubsidized loans.

If you choose not to pay the interest that accrues on your loans during certain periods when you are responsible for paying the interest (for example, during a period of deferment on an unsubsidized loan), the unpaid interest may be capitalized (that is, added to the principal amount of your loan). Learn more about capitalization.

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Try This Resource
Federal Student Loan Programs—Lists federal student loan programs with loan details and award limits.


How is interest calculated?

The amount of interest that accrues (accumulates) on your loan between your monthly payments is determined by a daily interest formula. This formula consists of multiplying your loan balance by the number of days since you made your last payment and multiplying that result by the interest rate factor.

Simple daily interest formula:
Interest Amount = (Outstanding Principal Balance x Interest Rate Factor) x Number of Days Since Last Payment

What is the interest rate factor?

The interest rate factor is used to calculate the amount of interest that accrues on your loan. It is determined by dividing your loan's interest rate by the number of days in the year.

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What is capitalization and how does it relate to interest?

Capitalization is the addition of unpaid interest to the principal balance of a loan. Generally, during periods when you are making payments on your federal student loans, your monthly loan payment will cover all of the interest that accrues (accumulates) between monthly payments, and you won’t have any unpaid interest. However, unpaid interest can accrue under certain circumstances. For example, you are not required to make monthly payments during a period of deferment, but if you have an unsubsidized loan, interest continues to accrue during the deferment period, and you are responsible for paying the interest. Unpaid interest may also accrue if you are repaying your loans under an income-driven repayment plan, and your required monthly loan payment is less than the amount of interest that accrues between payments.

When the interest on your federal student loan is not paid as it accrues during periods when you are responsible for paying the interest, your lender may capitalize the unpaid interest. This increases the outstanding principal amount due on the loan. Interest is then charged on that higher principal balance, increasing the overall cost of the loan. Depending on your repayment plan, capitalization may also cause your monthly payment amount to increase.

Unpaid interest is generally capitalized

For example, on a $10,000 Direct Unsubsidized Loan with a 6.8% interest rate, the amount of interest that accrues per day is $1.86 (find out how interest is calculated). If you are in a deferment for six months and you do not pay off the interest as it accrues, the loan will accrue interest totaling $340. At the end of the deferment, the accrued interest of $340 will be capitalized, and you’ll then be charged interest on the increased outstanding principal balance of $10,340. This will cause the amount of interest that accrues per day to increase to $1.93. Capitalization of the unpaid interest may also increase your monthly payment amount, depending on your repayment plan.

Interest is never capitalized on Federal Perkins Loans.

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Who sets interest rates for federal student loans?

Interest rates on federal student loans are set by federal law, not the U.S. Department of Education.

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How can I determine how much of my payment will go toward my outstanding principal balance?

First, understand that no payment you make will satisfy any loan principal until all outstanding interest has been paid. Using the interest calculation formula explained above, you can determine how much interest has accrued (accumulated) since your last payment. By subtracting the amount of accrued interest from your monthly payment and any other outstanding interest, you can figure out how much of your payment will be applied to your outstanding principal balance.

For example, on a $10,000 Direct Unsubsidized Loan with a 6.8% interest rate, the amount of interest that accrues per day is $1.86. Assuming you are repaying your loan under the Standard Repayment Plan, your monthly payment would be $115. If it has been 30 days since your last payment and there was no other interest outstanding when you made your last payment, $55.80 in interest will have accrued. Subtracting this amount from $115 results in a total of $59.20, which is the amount of your payment that would be applied to your outstanding principal balance of $10,000.

Under all of the income-driven repayment plans, your monthly payment amount may sometimes be less than the amount of interest that accrues on your loans. This is called negative amortization.

Contact your loan servicer if you have further questions about how your payment is applied to your principal balance.

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Are there any fees for federal student loans?

Most federal student loans have loan fees that are a percentage of the total loan amount. The loan fee is deducted proportionately from each loan disbursement you receive while enrolled in school. This means the money you receive will be less than the amount you actually borrow. You’re responsible for repaying the entire amount you borrowed and not just the amount you received.

The chart below shows the loan fees for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after Oct. 1, 2017.

Loan Type

First Disbursement Date

Loan Fee

Direct Subsidized Loans and Direct Unsubsidized Loans

On or after 10/1/18 and before 10/1/19

1.062%

On or after 10/1/17 and before 10/1/18

1.066%

Direct PLUS Loans

On or after 10/1/18 and before 10/1/19

4.248%

On or after 10/1/17 and before 10/1/18

4.264%

Loans first disbursed prior to Oct. 1, 2017, have different loan fees.

There are no loan fees for Perkins Loans.

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What are the interest rates on federal student loans first disbursed before July 1, 2018?

The following table provides interest rates for Direct Loans and Federal Family Education Loan (FFEL) Program loans1 first disbursed on or after July 1, 2006, and before July 1, 2018.

Perkins Loans (regardless of the first disbursement date) have a fixed interest rate of 5%.

Loan Type

Borrower Type

First Disbursement Date

Fixed Interest Rate

 

 

 

 

 

Direct Subsidized Loans

Subsidized Federal Stafford Loans 1

 

 

 

 

 

Undergraduate

7/1/17–6/30/18

4.45%

7/1/16–6/30/17

3.76%

7/1/15–6/30/16

4.29%

7/1/14–6/30/15

4.66%

7/1/13–6/30/14

3.86%

7/1/11–6/30/13

3.4%

7/1/10–6/30/11

4.5%

7/1/09–6/30/10

5.6%

7/1/08–6/30/09

6.0%

7/1/06–6/30/08

6.8%

Direct Subsidized Loans

Subsidized Federal Stafford Loans 1

Graduate or Professional 2

7/1/06–6/30/12

6.8%

 

 

Direct Unsubsidized Loans

Unubsidized Federal Stafford Loans 1

Undergraduate

7/1/17–6/30/18

4.45%

7/1/16–6/30/17

3.76%

7/1/15–6/30/16

4.29%

7/1/14–6/30/15

4.66%

7/1/13–6/30/14

3.86%

7/1/06–6/30/13

6.8%

 

 

Direct Unsubsidized Loans

Unubsidized Federal Stafford Loans 1

Graduate or Professional

7/1/17–6/30/18

6%

7/1/16–6/30/17

5.31%

7/1/15–6/30/16

5.84%

7/1/14–6/30/15

6.21%

7/1/13–6/30/14

5.41%

7/1/06–6/30/13

6.8%

 

 

 

Direct PLUS Loans

 

Parents and Graduate or Professional

7/1/17–6/30/18

7%

7/1/16–6/30/17

6.31%

7/1/15–6/30/16

6.84%

7/1/14–6/30/15

7.21%

7/1/13–6/30/14

6.41%

7/1/06–6/30/13

7.9%

Federal PLUS Loans 1

Parents and Graduate or Professional

7/1/06–6/30/10

8.5%

1These loans were made under the Federal Family Education Loan (FFEL) Program. No new FFEL Program loans have been made since July 1, 2010.
2As of July 1, 2012, graduate or professional students are no longer eligible to receive subsidized loans.

Most loans (excluding Perkins Loans) first disbursed prior to July 1, 2006, have variable interest rates that are effective from July 1 of one year through June 30 of the following year. Interest rates for these loans are not displayed on this site. For information about any variable-rate loans you may have, contact your loan servicer.

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